THE  UNIVERSITY 

OF  ILLINOIS 

LIBRARY 


55Z 

Bazs 


^^W\ 


■"'>        "^J^     v"  ,f'w»^<Ai   ''tail 


CONSIDERATIONS  O 


ON  THE 


CURRENCY  AND  BANKING  SYSTEM 


OP  THE 


UNITED    STATES. 


BY  ALBERT  GALLATIN. 


CAREY  &  LEA.— CHESTNUT  STREET. 
1831. 


ADVERTISEMENT. 


This  Essay  was  prepared  for  the  American  Quarterly 
Review  of  December,  1830.  The  labor  of  digesting  and 
condensing  several  hundred  bank  returns  proved  much 
greater  than  had  been  anticipated ;  and  the  time  was 
too  short  for  a  thorough  investigation.  They  have  been 
now  carefully  examined,  and  the  general  results  are,  it 
is  believed,  as  correct,  as  can  be  expected  from  the  ma- 
terials on  hand.  Several  transpositions  and  verbal  al- 
terations have  also  been  made;  some  short  explanatory 
notes  have  been  added;  and  tabular  statements  are 
annexed,  which  could  not  be  inserted  in  a  Review, 

New- York,  January  1st,  1831. 


•^ 


CONTENTS. 


Introduction , Page   5 

Precious  metals 6 

Paper  money 19 

not  convertible  into  specie 20 

convertible  at  virill 28 

Banking  system  of  the  United  States 39 

Remedies — enlargement  of  metallic  currency 55 

suppression  of  small  notes , 56 

proper  valuation  of  gold  coins 57 

miscellaneous  provisions 65 

Constitutional  powers  of  Congress 71 

Stamp  duties 75 

Bank  of  the  United  States 76 

Objections  answered , 84 

Notes.     A.  Ratio  of  gold  to  silver 93 

B.  Banks  of  Scotland ib- 

C.  Restrictions  on  private  banking 95 

Statements.    I.  Banks  in  operation,  1st  January  1830 97 

II.  Situation  of  banks  (ascertained)  January  1st  1830. .  101 

III.  Capital  of  other  Banks "         '^       "  103 

IV.  Banks  which  have  failed ib. 

V.  Depreciation  of  bank  notes  during  the  suspension  of 

specie  payments. 106 

VI.  Situation  of  the  United  States  Bank,  1819  to  1829  ib. 
VII.  Distribution  of  the  nett  circulation  of  the  United 

States  Bank,  September  1830 ib. 


CONSIDERATIONS,  &c. 


THE  framers  of  the  Constitution  of  the  United  States  were 
deeply  impressed  with  the  still  fresh  recollection  of  the  baneful 
effects  of  a  paper  money  currency,  on  the  property  and  on  the 
moral  feeling  of  the  community.  It  was  accordingly  provided  by 
our  National  Charter,  that  no  state  should  coin  money,  emit  bills 
of  credit,  make  any  thing  but  gold  arid  silver  coin  a  tender  in  pay- 
ment of  debts,  or  pass  any  law  impairing  the  obligation  of  con- 
tracts ;  and  the  power  to  coin  money  and  to  regulate  the  value 
thereof,  and  of  foreign  coin,  was,  by  the  same  instrument,  vested 
exclusively  in  Congress.  As  this  body  has  no  authority  to 
make  any  thing  whatever  a  tender  in  payment  of  private  debts, 
it  necessarily  follows,  that  nothing  but  gold  and  silver  coin  can 
be  made  a  legal  tender  for  that  purpose,  and  that  Congress  can- 
not authorize  the  payment,  in  any  species  of  paper  currency,  of 
any  other  debts  but  those  due  to  the  United  States,  or  such  debts 
of  the  United  States  as  may,  by  special  contract,  be  made  paya- 
ble in  such  paper.  AU  the  engagements  previously  contracted 
at  home,  by  the  United  States,  were  expressed  in  Spanish  dol- 
lars ;  all  the  moneys  of  account  of  the  several  states,  were  esti- 
mated and  payable  in  that  coin;  there  might  be  some  uncertainty 
as  to  the  precise  weight  of  pure  silver  which  it  contained ;  and 
the  assays  made  at  the  time,  may  not,  for  want  of  proper  means, 
have  had  all  the  accuracy  of  which  that  process  is  susceptible. 
But  they  were  made  in  good  faith ;  and  the  Act  of  Congress  of 
the  year  1791,  which  declared  that  the  dollar  of  the  United 
States  should  contain  371^  grains  of  pure  silver,  has  irrevocably 
fixed  that  quantity  as  the  equivalent  of  a  dollar  of  account,  and 
as  the  permanent  standard  of  value,  according  to  which  all  con- 
tracts must  be  performed.  The  relative  legal  value  of  gold  and 
foreign  coins  to  that  standard,  may  from  time  to  time  be  varied, 
provided  that  neither  shall  be  so  overrated,  as  to  authorize  the 
payment  of  a  debt  witli  an  amount  in  such  coin  of  a  less  actual 
value,  than  that  of  the  silver  to  which  it  may  be  made  to  cor- 
respond. 

The  provisions  of  the  Constitution  were  universally  considered 
as  affording  a  complete  security  against  the  danger  of  paper 


6  BANKS  AND  CURRENCY. 

money.  The  introduction  of  the  banking  system,  met  with  a 
strenuous  opposition  on  various  grounds ;  but  it  was  not  appre- 
hended that  bank  notes,  convertible  at  will  into  specie,  and  which 
no  person  could  be  legally  compelled  to  take  in  payment,  would 
degenerate  into  pure  paper  money,  no  longer  paid  at  sight  in 
specie.  At  a  later  date,  although  occasional  bankruptcies  had 
taken  place,  and  might  again  be  anticipated,  there  was  no  ap- 
prehension of  a  general  failure  of  the  banks  in  three-fourths  of 
the  states.  Still  less  was  it  expected,  and  it  was  the  catastrophe 
of  the  year  1814  which  first  disclosed  not  only  the  insecurity  of 
the  American  banking  system,  as  then  existing,  but  also,  that 
when  a  paper  currency,  driving  away,  and  superseding  the  use 
of  gold  and  silver,  has  insinuated  itself  through  every  channel  of 
circulation,  and  become  the  only  medium  of  exchange,  every 
individual  finds  himself,  in  fact,  compelled  to  receive  such  cur- 
rency, even  when  depreciated  more  than  twenty  per  cent,  in 
the  same  manner  as  if  it  had  been  made  a  legal  tender.  The  es- 
tablishment of  the  Bank  of  the  United  States  was  recommended 
by  the  Treasury,  and  that  Institution  was  incorporated  by  Con- 
gress, for  the  express  and  avowed  purpose  of  removing  an  evil, 
which  the  difference  in  the  rate  of  depreciation,  between  the 
paper  currencies  of  the  several  states,  and  even  those  of  different 
places  in  the  same  state,  had  rendered  altogether  intolerable. 
The  object  in  view  has  been  obtained.  The  resumption  of  specie 
payments,  which  the  state  banks  had  been  unwilling  or  unable 
to  effect,  took  place  immediately  after  that  of  the  United  States 
had  commenced  its  operations.  And  it  has,  for  a  number  of 
years,  supplied  the  country  with  a  currency  safer,  and,  it  must 
at  least  be  allowed,  more  uniform,  than  that  which  the  state 
banks  could  furnish.  The  question,  whether  the  charter,  which 
expires  in  a  few  years,  should  be  renewed,  has  been  brought  by 
the  President  before  Congress,  with  a  suggestion  that  a  national 
bank,  founded  upon  the  credit  and  revenues  of  the  government, 
might  be  advantageously  substituted,  to  that  now  in  existence. 
Reports  favorable  to  the  continuance  of  the  present  bank,  have 
.been  made  by  committees  of  both  houses  of  Congress.  Another 
report,  on  the  relative  value  of  gold  and  silver,  and  intimately 
connected  with  the  subject  of  currency,  has  also  been  made  by 
the  Secretary  of  the  Treasury  to  the  Senate.  Availing  ourselves 
of  the  information  afforded  by  those  documents,  and  particularly 
of  the  arguments  adduced  in  Mr.  M'Duffie's  able  report,  we 
intend  to  examine  this  important  question,  principally  in  refer- 
ence to  the  currency  of  the  country,  considered  as  the  common 
standard,  by  which  the  value  of  all  the  other  commodities  is 
estimated,  and  every  contract  is  performed. 

Whatever  commodity  or  species  of  paper  may,  by  law  or 
general  consent,  be  universally  received  in  any  country,  in  ex- 
change of  every  other  commodity,  and  in  payment  of  all  debts, 


BANKS  AND  CURRENCY.  7 

is  the  circulating  medium  or  currency  of  such  country,  or  in 
other  words,  its  common  standard  of  the  value  of  all  commodities 
whatever,  and  that  which  regulates  the  performance  of  all 
contracts  not  specially  excepted.  It  is  therefore  of  primary 
importance,  that  the  commodity  or  substitute,  which  n,ay  be 
selected  for  that  purpose,  should  be  of  a  value  as  permaneit  as 
practicable,  and  the  same  in  every  part  of  the  same  counby ; 
and  it  is  also  highly  desirable,  that  the  same  circulating  medium 
should  be  common  to  all  countries  connected  by  commerce. 
Gold  and  silver  are  the  only  substances,  which  have  been,  and 
continue  to  be,  the  universal  currency  of  civilized  nations.  It 
is  not  necessary  to  enumerate  the  well-known  properties  which 
rendered  them  best  fitted  for  a  general  medium  of  exchange. 
They  were  used,  not  only  as  ornaments  and  objects  of  luxury, 
but  also  for  that  particular  purpose,  from  the  earliest  times.  We 
learn  from  the  most  ancient  and  authentic  of  records,  that  Abra- 
ham was  rich  in  cattle,  in  silver,  and  in  gold ;  that  he  purchased 
a  field  for  as  much  money  as  it  is  worth,  and  in  payment  weighed 
four  hundred  shekels  oi  silver,  current  (money)  with  the  mer- 
chant. And  when  we  see  that  nations,  differing  in  language, 
religion,  habits,  and  on  almost  every  subject  susceptible  of 
doubt,  have,  during  a  period  of  near  four  thousand  years,  agreed 
in  one  respect;  and  that  gold  and  silver  have,  uninterrupt- 
edly to  this  day,  continued  to  be  the  universal  currency  of  the 
commercial  and  civilized  world,  it  may  safely  be  inferred,  that 
they  have  also  been  found  superior  to  any  other  substance  in 
that  permanency  of  value,  which  is  the  most  necessary  attribute 
of  a  circulating  medium,  in  its  character  of  the  standard,  that 
regulates  the  payment  of  debts,  and  the  performance  of  con- 
tracts. 

There  is  not,  however,  in  nature,  any  perfect  or  altogether 
permanent  standard  of  value.  There  is  not  a  single  commodity, 
the  relative  value  of  which,  as  compared  to  that  of  all  other 
commodities,  is  not  subject  to  great  and  permanent  changes  as 
well  as  to  temporary  fluctuations.  But  it  will  be  found,  that 
the  nature  of  the  demand  for  precious  metals,  the  comparative 
regularity  of  the  supply,  and  especially  their  much  greater  du- 
rability and  intrinsic  value,  than  those  of  any  other  sub&tancd 
otherwise  fitted  for  a  circulating  medium,  restrain  the  fluctua- 
tions to  which  the  relative  value  is  liable,  within  far  narrower 
limits,  than  is  the  case  with  any  other  commodity  which  might 
have  been  selected  for  a  currency. 

It  is  well  known  that  the  discovery  of  America  was  followed  by 
a  great  and  permanent  change  in  the  price  of  the  precious  metals> 
which  reduced  it  to  one-fourth  of  their  previous  relative  value 
as  compared  to  all  other  commodities.  This  great  revolution  was 
due  to  a  simultaneous  vast  increase  of  the  supply  and  correspond- 
ing reduction  in  the  cost  of  production  of  (he  metals.  The  A  me- 


8  BANKS  AND  CURRENCY 

rican  mines  o(  silver  do  not  lie  nearer  the  surface  of  the  earth 
than  those  of  other  countries ;  the  ore  rarely  yields  more  silver 
than  one-iburth  per  cent,  of  its  w^eight;  nor  was  there  at  the  time 
any  im»rovement  adopted  that  tended  materially  to  lessen  the 
expepie  of  extracting  the  silver  from  the  ore.*  The  superiority 
of  tie  silver  mines  of  America,  appears  to  consist,  principally, 
in  rtie  magnitude  of  the  beds,  and  the  much  greater  quantity 
of  ore  vsrhich  can  accordingly  be  dug  out  with  the  same  labor. 
The  annual  labor  of  one  miner  at  the  mine  of  Valenciana, 
the  most  fertile  of  Mexico,  was  sufficient,  in  1803,  to  extract 
from  the  bowels  of  the  earth,  four  hundred  quintals  of  ore, 
which  produced  one  quintal  of  silver ;  and  the  annual  produce 
of  the  mine  exceeded  three  millions  of  dollars  in  value,  (about 
220,000  lbs.  troy  weight) :  whilst,  at  the  richest  mine  of  Saxony, 
the  annual  labor  of  eleven  miners  was  necessary  to  extract  the 
ore  sufficient  to  produce  a  quintal  of  silver;  and  the  annual  pro- 
duce was  less  than  ninety  thousand  dollars,  (about  6,200  lbs. 
troy  weight).  Although  the  money  price  of  mining  labor  appears 
to  be  five  times  greater  in  Mexico  than  Saxony,  and  notwith- 
standing the  want  of  fuel  and  other  circumstances  which  in- 
crease the  current  expenses,  the  cost  of  production  was  still 
much  less  at  the  Mexican  than  at  the  Saxon  mine,  and  left  a 
considerable  rent  to  the  owner.  The  Saxon  mine,  though  prob- 
ably as  rich  as  any  that  was  in  operation  in  Europe  prior  to  the 
discovery  of  America,  could  not,  on  account  of  the  difference  in 
the  rate  of  wages,  be  worked  if  situated  in  Mexico.  It  follows, 
that  all  the  American  silver  mines  are  superior  to  it  in  fertility, 
though  in  that  respect  differing  from  each  other,  and  gradually 
decreasing  from  that  of  Valenciana,  down  to  the  poorest,  which 
probably  affords  no  rent  to  the  owner. 

The  American  mines,  or  washings  of  gold,  are  in  the  same 
manner  more  fertile,  or,  with  the  same  labor,  produce  much 
greater  quantities  of  pure  metal  than  those  of  Europe.  But  the 
difference  must  have  been  less  with  respect  to  gold  than  to  silver 
mines.  The  relative  value  of  gold  to  silver  was,  before  the 
discovery  of  America,  at  the  ratio  of  11  or  12,  and  is  now  at 
that  of  15  or  16  to  1.  If  the  depreciation  in  the  value  of  silver 
has  been  at  the  rate  of  4  to  1,  that  of  gold  has  been  only  at  the 
rate  of  about  3  to  1 ;  and  this  may  afford  some  reason  to  think, 
that,  of  the  two  metals,  gold  is  probably  the  most  permanent 
standard  of  value.  It  must  be  observed,  that,  though  wanted 
for  similar  purposes,  the  relative  value  of  gold  to  silver  does  not 
depend  on  any  supposed  similarity  or  connexion  between  the 
two  metals,  but  is  the  result  of  their  respective  prime  cost,  which 
determines  the  value  of  each  in  relation  to  that  of  all  other 
commodities. 


*  Humboldt's  New  Spain. 


BA.\KS  AXD  CURRENCY.  9 

As  the  total  irtiportatioii  of  precious  metals  from  America  to 
Europe  had  not,  prior  to  the  year  1596,  exceeded  a  quantity 
equal  to  that  contained  in  eight  hundred  milHons  of  dollars,  and 
the  depreciation  was  then  already  at  the  rate  of  about  3-^  to  1, 
it  is  probable  that  the  total  amount  of  gold  and  silver  existing 
in  Europe  prior  to  the  discovery  of  America,  though  worth  then 
four  times  as  much,  did  not  in  quantity  exceed  that  contained 
ill  three  hundred  millions  of  dollars,  money  of  the  present 
times. 

The  total  amount  of  gold  and  silver  produced  by  the  mines 
of  America,  to  the  year  1803,  inclusively,  and  remaining  there 
or  exported  to  Europe,  has  been  estimated  by  Humboldt  at 
about  five  thousand  six  hundred  millions  of  dollars;  and  the 
product  of  the  years  1804 — 1830,  may  be  estimated  at  seven 
hundred  and  fifty  millions.  If  to  this  we  add  one  hundred  mil- 
lions, the  nearly  ascertained  product  to  tliis  time  of  the  mines 
bf  Siberia,  about  four  hundred  and  fifty  millions  for  the  African 
gold  dust,  and  for  the  product  of  the  mines  of  Europe,  (which 
yielded  about  three  millions  a  year  in  the  beginning  of  this  cen- 
tury.) from  the  discovery  of  America  to  this  day,  and  three 
hundred  millions  for  the  amount  existing  in  Europe  prior  to  the 
discovery  of  America,  we  iind  a  total  not  widely  dilfering  from 
the  fact,  of  seven  thousand  two  hundred  millions  of  dollars.  It 
is  mucli  more  difficult  to  ascertain  the  amount  which  now  re- 
mains in  Europe  and  An>3rica  together.  The  loss  by  friction 
and  accidents  might  be  estimated, and  lesearches  made  respect- 
ing the  total  amount  which  has  been  exported  to  countries  beyond 
the  Cape  of  Good  Hope ;  but  that  wliich  has  been  actually  con- 
sumed in  gilding,  plated  ware,  and  other  manufactures  of  the 
same  character,  cannot  be  correctly  ascertained.  From  the  im- 
perfect data  within  our  reach,  it  may,  we  think,  be  affirmed, 
that  the  amount  still  existing  in  Europe  and  America  certainly 
exceeds  four  thousand,  and  most  probably  falls  short  of  five 
thousand  millions  of  dollars.  Of  the  medium,  or  four  thousand 
live  hundred  millions,  which  we  have  assumed,  it  appears  that 
from  ^  to  f  is  used  as  currency,  and  that  the  residue  consists  of 
plate,  jewels,  and  other  manufactured  articles.  It  is  known, 
that  of  the  gross  amount  of  seven  thousand  two  hundred  mil- 
lions of  dollars,  about  1800  millions  or  ;}th  of  the  whole  in 
value,  and  ^Vth  in  weight,  consisted  of  gold.  Of  the  four  thousand 
five  hundred  millions,  the  presumed  remaining  amount  in  gold 
and  silver,  the  proportion  of  gold  is  probably  greater,  on  account 
of  the  exportation  to  India  and  China  having  been  exclusively 
in  silver,  and  of  the  greater  care  in  preventing  every  possible 
waste  in  an  article  so  valuable  as  gold. 

In  order,  therefore,  to  produce  a  revolution  in  the  price  of 
gold  and  silver,  such  ns  was  caused  by  that  event,  mines  must 
be  discovered,  which,  in  thirty  or  forty  years,  should  produce,- 


10  BANKS  AND  CURRENCY. 

in  addition  to  the  supply  required  by  the  increasing  demand, 
thirteen  or  fourteen  tliousand  millions  of  dollars,  or  three  times 
the  quantity  now  existing;  and  this  increased  supply  must  be 
accompanied  with  a  corresponding  reduction  in  the  cost  of  pro- 
duction. It  is  obvious,  that  the  discovery  of  one  hundred  new 
mines,  even  superior  in  magnitude,  and  equal  in  other  respects 
to  that  of  Valenciana,  would  only  cause  mines  of  inferior  fer- 
tility to  be  abandoned,  and  could  produce  no  greater  effect  on  the 
price  of  silver,  than  reducing  it  to  the  actual  cost  of  production 
at  the  mine  of  Valenciana.  The  expense  of  extracting  the  silver 
from  ore  of  a  given  quality,  once  brought  to  the  surface  of  the 
earth,  bears  too  small  a  proportion  to  the  whole  expense  of  work- 
ing a  mine,  to  render  it  possible  that  any  improvement  in  that 
process  should  cause  any  great  reduction  in  the  price  of  the  metal 
It  does  not  appear  that  such  reduction  can  be  effected,  other- 
wise than,  either  by  the  discovery  of  numerous  and  large  beds 
of  ore,  much  richer  in  silver  than  any  yet  worked,  or  by  a  great 
reduction  in  the  money  price  of  labor  in  America,  Judging 
from  analogy,  the  first  event,  at  least  to  a  sufficient  extent,  is 
altogether  improbable;  and  the  last  contingency  cannot  take 
place  but  slowly  and  gradually.  On  the  other  hand,  the  dimi- 
nution in  the  annual  supply  for  the  last  twenty  years,  having 
been  exclusively  caused  by  the  convulsions  attending  the  revo- 
lutions of  the  new  American  states,  is  but  temporary ;  and  the 
successive  numerous  discoveries  of  new  mines,  during  the  seven- 
teenth and  eighteenth  centuries,  render  it  highly  probable,  that, 
after  order  and  security  shall  have  been  restored  in  those  states, 
a  similar  progress  will  take  place,  and  continue,  as  heretofore, 
to  produce  an  increasing  annual  supply,  corresponding  with  the 
increasing  demand.  This  demand,  also,  being  always  propor- 
tionate to  the  wealth  and  prosperity  of  the  civilized  world,  can 
increase  but  gradually.  It  is,  therefore,  highly  improbable,  that 
any  new  revolution  should  again  occur,  producing  effects  in  any 
degree  similar  to  those  which  followed  the  discovery  of  Ame- 
rica, or  that  there  should  be  any  other  permanent  alteration 
in  the  price  of  the  precious  metals,  but  such  slow  and  gradual 
changes  as  cannot  substantially  afTect  the  due  performance  of 
the  great  mass  of  ordinary  contracts.  Before  we  examine  the 
temporary  fluctuations  in  price,  to  which  both  gold  and  silver 
are  liable,  it  is  necessary  to  inquire  into  the  nature  of  the  de- 
mand for  those  metals. 

Mines  being,  like  tillable  land,  private  property,  and  of  dif- 
ferent fertility,  the  rent  of  either,  as  well  as  the  intrinsic  value 
of  their  respective  produce,  are  regulated  by  analogous  laws. 
But  there  is  an  essential  difference  between  the  demand  for 
corn  and  that  for  the  precious  metals.  That  for  corn,  or  the 
ordinary  article  of  food,  is  for  an  amount  in  quantity,  without 
much  regard  to  value.  That  for  gold  and  silver  is  for  an  amount 


BANKS  AND  CURRENCY.  11 

in  value  and  not  in  quantity.  More  food  is  consumed  and  may 
be  wasted  in  plentiful  years,  than  in  those  of  scarcity.  But  there 
is  always  a  certain  quantity  of  corn,  or  other  usual  article  of 
food,  determined  by  population,  and  which  must  necessarily  be 
supplied  at  any  price,  without  any  other  limits  than  actual  de- 
ficiency in  the  supply,  or  absolute  inability  to  pay  the  market 
price ;  and  in  either  case  a  portion  of  the  suffering  population 
must  perish.  In  a  country  requiring  annually  at  least  fifty  mil- 
lions bushels,  or  any  other  quantity  of  corn,  for  the  7iecessary 
subsistence  of  its  inhabitants,  there  is  a  most  imperative  demand 
for  that  amount,  or  a  substitute  for  it ;  and  this  must  be  satis- 
fied, if  the  amount  can  be  procured  at  all,  and  at  any  price, 
provided  the  country  can  by  any  means  pay  for  it.  The  demand 
for  corn  is  therefore  for  a  certain  quantity  regulated  by  the 
population,  and  not  for  a  certain  value  proportionate  to  the  in- 
come, capital,  or  wealth  of  the  country. 

But  the  demand  for  gold  and  silver  is,  either  for  plate,  jewels, 
and  other  manufactured  articles,  such  as  plated  ware,  gilding, 
&.C. ;  in  which  those  metals  are  used,  or  for  currency.  It  is  evi- 
dent, that  all,  or  nearly  all  those  objects  of  demand  being,  with 
the  exception  of  currency,  articles  of  luxury,  the  effective  de- 
mand for  them,  including  both  the  wish  to  possess  and  the  means 
to  pay,  must  be  proportionate  to  wealth,  and  therefore  for  a  cer- 
tain amount  in  value  and  not  in  quantity.  No  individual  can  lay 
out  more  than  a  certain  portion  of  his  income  or  capital  in  plate 
and  jewels.  If  the  price  of  the  precious  metals  is  reduced  to 
one  fourth  of  what  it  previously  was,  as  happened  during  the 
latter  end  of  the  sixteenth  century,  he  will  be  able,  with  the 
same  income,  to  obtain  four  limes  the  quantity  of  plate  and  gold 
ornaments  which  he  formerly  possessed,  because  their  value  re- 
mains the  same.  But  the  increased  cheapness  will  in  a  very 
inconsiderable  degree,  if  at  all,  have  a  tendency  to  increase  the 
amount  in  value  of  gold  and  silver  articles  which  will  be  used. 
An  individual  may  be  induced  by  such  great  reduction  in  the 
price  of  silver,  to  substitute  silver  spoons  or  forks  to  those  made 
of  inferior  metal ;  but  so  long  as  silver  spo^^ns  or  forks  are  dearer 
than  those  of  any  other  metal,  he  cannot,  his  income  remaining 
the  same,  indulge  his  wish  without  retrenching  his  expenses  in 
some  other  respects,  and  without  depriving  himself  of  some  other 
comforts.  What  is  true  of  every  individual  in  every  country,  is 
equally  so  of  the  aggregate  of  individuals,  or  of  every  country. 
The  demand  for  an  increased  value  of  plate,  jewels,  and  other 
articles  manufactured,  in  whole  or  in  part,  of  gold  or  silver, 
with  the  exception  perhaps  of  a  few  articles  in  general  use 
amongst  all  classes,  will  ever}'' where  be  nearly  in  proportion  to 
the  wealth  of  each  country  respectively.  And  what  is  nearly 
correct,  as  regards  the  demand  for  mamifacturcs  of  gold  and 


12  BAI«JKS  AND  CURRENCY. 

silver,  is  strictly  true  as  applied  to  the  demand  for  those  metals 
for  currency. 

As  a  silver  dollar,  or  dollar  bank  note,  passing  from  hand  to 
hand,  effects  in  a  given  time,  a  year  for  instance,  a  great  num- 
ber of  payments,  the  amount  of  currency  wanted  in  any  country 
is  always  much  less  than  the  gross  amount  of  payments  made  in 
currency  within  the  same  time.  The  amount  thus  wanted  is 
that  which  is  necessary  and  sufficient,  for  the  payment  of  all 
such  purchases  of  land,  labor  and  product  of  labor  (embracing 
every  species  of  commodities  and  capital)  as  are  paid  with  cur- 
rency. Its  value  must  always,  therefore,  bear  a  certain  propor- 
tion to  the  aggregate  xalue  of  the  land,  labor,  and  all  objects 
whatever,  thus  paid  for  with  currency.  That  proportion,  as 
well  as  that  which  the  value  of  the  annual  purchases  effected 
with  currency  may  bear  to  the  value  of  the  whole  amount  of 
annual  exchanges  and  purchases  of  the  country,  whether  ef- 
fected with  currency  or  by  any  other  means,  must  vary,  and 
cannot  be  precisely  ascertained.  But,  whatever  either  of  these 
two  ratios  may  be,  the  average  value  of  the  various  objects  pur- 
chased, which  are  paid  for  in  currency  within  a  given  time,  a 
year  for  instance,  will  always  require  a  certain  proportionate 
value  of  currency.  The  average  value  of  the  objects,  thus  an- 
nually paid  for,  determines  the  total  average  amount  in  value 
of  currency  which  is  requisite,  and  in  the  case  before  us,  the 
average  value  of  precious  metals  which  is  wanted  for  currency, 
and  for  which  there  is  an  actual  demand  for  that  purpose. 

Let  it  be  supposed  that  the  amount  of  currency  wanted  in  a 
country,  is  one-tenth  part  of  the  whole  amount  of  the  annual 
payments  made  there  in  currency  ;  and  that  the  currency  con- 
sisting exclusively  of  silver,  there  are  annually  in  that  country 
one  million  of  bushels  of  wheat  sold  and  paid  for  in  currency. 
It  is  clear,  that  if  the  relative  value  of  silver  to  wheat  be  such 
in  such  country,  that  one  ounce  of  silver  is  the  equivalent  and 
common  price  of  a  bushel  of  wheat,  one  hundred  thousand  ounces 
of  silver  will  be  necessary  and  sufficient  to  effect  the  payment  of 
all  the  wheat  annually  sold  and  paid  for  in  currency.  If  on  ac- 
count of  a  reduction  in  the  cost  of  its  production,  or  from  any 
other  cause,  the  value  of  silver,  as  compared  to  that  of  all  other 
commodities,  should  be  reduced  to  one-half  of  what  it  previously 
was,  the  value  of  wheat,  as  compared  with  that  of  all  other 
commodities,  silver  excepted,  remaining  the  same  as  before,  two 
hundred  thousand  ounces  of  silver  .would  be  necessary  to  effect 
the  payment  of  the  one  million  of  Oushels  of  wheat  sold  for  cur- 
rency during  the  year.  But  although  the  quantity  of  silver  (or 
nominal  amount  of  currency)  wanted,  was  twice  as  great  as  be- 
fore, the  value  would  remain  precisely  the  same,  two  hundred 
thousand  having  become  worth  no  more  than  one  hundred  thou- 
s.ind  ounces  had  previously  been.     If,  instead  of  this,  the  value 


BANKS  AND  CURRENCY.  13 

of  silver  had  undergone  no  change,  and  either  the  quantity  of 
wheat,  annually  sold  and  paid  for  in  currency,  had  increased  to 
two  millions  of  bushels,  its  price  remaining  the  same,  or,  the 
quantity  thus  sold  remaining  the  same,  the  value  of  wheat  as 
compared  to  all  other  commodities  had  doubled,  as  the  two  hun- 
dred thousand  ounces  of  silver,  wanted  to  effect  the  payments 
of  the  sales  of  wheat,  would  actually  be  worth  twice  as  much 
as  the  one  hundred  thousand  ounces  had  been,  the  value  of  cur- 
rency wanted  would  be  twice  as  great  as  theretofore. 

What  is  true  of  the  proportionate  value  of  the  currency,  want- 
ed to  effect  the  payment  of  the  quantity  of  wheat  annually  paid 
for  in  currency,  to  the  value  of  that  wheat,  is  equally  true  of  the 
proportionate  value  of  the  currency,  wanted  to  effect  the  payment 
of  the  whole  amount  of  land,  labor,  and  products  of  labor,  an-: 
nually  paid  for  in  currency,  to  the  aggregate  value  of  all  those 
objects.  Although  the  proportion  may  vary,  according  to  the 
rapidity  of  the  circulation,  and  to  the  means  used  in  order  to 
economize  the  currency,  it  is  always  that  aggregate  value,  which 
determines  the  value  of  the  currency  wanted  in  any  country. 
Whilst  that  aggregate  value  remains  the  same,  any  great  varia- 
tion in  the  amount  in  quantity  of  the  currency  must  be  due  to 
a  change,  or  cause  a  change,  in  its  value,  as  compared  with  that 
of  all  other  commodities.  Where  gold  and  silver  are  the  only 
currency,  any  great  and  permanent  increase  in  the  quantity  of 
those  metals  used  as  currency,  (the  aggregate  value  of  the  ob- 
jects annually  paid  for  in  currency  remaining  the  same,)  must 
be  due  to  a  corresponding  reduction  in  the  cost  of  production 
of  gold  and  silver ;  which  cost,  leaving  to  the  owners  of  mines 
a  greater  or  less  rent  according  to  their  fertility,  determines  the 
value  of  those  metals  as  compared  with  that  of  all  other  com- 
modities. Where  a  paper  has  been  substituted  to  a  metallic 
currency,  any  similar  considerable  increase  in  its  amount  must 
cause  a  corresponding  depreciation  in  its  value,  if  the  aggregate 
value  of  the  objects,  annually  paid  for  in  currency,  remains  the 
same. 

The  amount  in  value  of  the  currency  wanted  to  effect 
the  necessary  payments,  though  but  a  comparatively  small  por- 
tion, is  one  of  the  most  important,  productive,  and  necessary 
portions  of  the  capital  of  a  nation.  Its  use  is  substituted  to  ah 
inconvenient  barter  or  exchange  of  one  commodity  for  another; 
it  enables  every  individual  to  dispose  at  all  times,  and  with  fa- 
cility, of  the  whole  surplus  of  the  products  of  his  industry,  and 
to  purchase  with  the  proceeds  any  of  the  products  of  the  indus- 
try of  others  which  he  may  want ;  it  promotes  the  division  of 
labor,  and  vivifies  the  industry  of  the  whole  country.  But  when- 
ever the  precious  metals  used  as  currency  exceed  in  any  country 
the  value  wanted  to  effi^rt  fhe  nercssarv  pavmfMits,  (he  surplus 
becomes  a  dead  and  unproductive  stock  ;  and  it  will,  according- 


14  BANKS  AND  CURRENCY. 

ly,  be  either  converted  into  manufactured  articles  of  those 
metals,  or  be  exported  to  other  countries.  If  on  the  contrary 
the  currency  should  consist  of  an  irredeemable  paper,  having 
only  an  artificial  and  local  value,  and  none  whatever,  either 
in  other  countries  or  for  any  other  purpose ;  it  is  evident  that 
any  excess  in  the  nominal  value  of  such  currency,  beyond  the 
actual  value  sufficient  to  make  the  necessary  payments,  must 
cause  a  corresponding  depreciation  in  that  nominal  value.  If 
fifty-five  millions  of  ounces  of  pure  silver,  at  its  present  value 
as  compared  with  all  other  commodities,  are  sufficient  on  an 
average  to  effect  all  the  payments  made  in  the  United  States  in 
currency,  the  whole  quantity  of  a  paper  currency  substituted  to 
silver,  cannot,  on  an  average,  whatever  its  nominal  amount  may 
be,  exceed  in  value  fifty-five  millions  of  ounces  of  pure  silver, 
or  about  seventy-one  millions  of  dollars  in  our  present  coin. 
Whether  such  currency  amounted  nominally  to  seventy-one,  one 
hundred,  or  one  hundred  and  forty  millions  of  dollars,  its  value 
would  not,  on  an  average,  exceed  that  of  the  seventy-one  mil- 
lions of  silver  dollars  wanted  to  elTect  the  necessary  payments ; 
and  the  paper  money  would  generally  depreciate  at  least  in  pro- 
portion to  the  excess  of  its  nominal  amount  beyond  seventy-one 
millions  of  silver  dollars.  Having  recurred  to  numbers  by  way 
of  illustration,  it  is  proper  to  observe,  that  we  do  not  mean  to 
assert  that  the  total  value  of  currency  wanted  in  any  country 
is  a  fixed  sum.  Even  when  no  alteration  has  taken  place  in 
the  industry  and  commerce  of  a  country,  the  amount  of  currency 
may  occasionally,  to  a  certain  extent,  exceed  that  which  is  actu- 
ally wanted,  without  affecting  its  price.  An  approximation  of 
the  average  amount,  which  always  fluctuates  within  certain 
limits,  is  all  we  pretend  to  give. 

It  is  obvious  that  the  aggregate  value  of  the  annual  payments 
made  in  currency,  which  regulates  the  value  of  the  currency 
wanted,  must  itself  principally  depend  on  the  aggregate  value 
of  the  land,  labor,  products  of  labor,  and  in  short  of  all  the  ob- 
jects which  are  or  may  be  annually  sold  or  exchanged.  The 
amount  of  the  value  of  currency  wanted,  or  the  demand  for 
currency  in  every  country,  depends  therefore  principally  on  its 
wealth,  but  is  modified  in  some  degree  by  the  state  of  society. 
The  wages  of  labor,  and  the  rent  of  land,  are,  in  most  countries. 
no  inconsiderable  portion  of  the  objects  which  must  be  paid  for 
in  money.  Countries  where  slave  is  generally  used  instead  of 
free  labor,  or  where,  as  in  the  United  States,  the  greater  part 
of  the  land  is  occupied  and  tilled  by  the  owners,  or,  when  rented, 
let  generally  on  shares,  will,  therefore,  with  equal  wealth,  require 
a  less  proportionate  amount  of  currency  in  value.  Less  is  also 
wanted  in  purely  agricultural  countries,  and  everywhere  by 
those  engaged  in  agriculture,  than  in  any  other  profession.  As  a 
far  greater  part  of  the  income  of  almost  every  individual  is  ex- 


BANKS  AND  CURRENCY.  15 

pended  on  articles  of  food,  than  on  the  product  of  any  other  one 
branch  of  industry,  farmers  consume  a  much  greater  part  of  the 
products  of  their  own  industry,  and  they  therefore  have  a  less 
proportionate  amount  of  those  products  to  exchange  for  the  pro- 
ducts of  the  industry  of  others,  than  any  other  profession.  Barter 
continues  also  to  be  a  principal  mode  of  exchange  in  the  country, 
at  least  in  a  great  portion  of  the  United  States,  where  the  planter 
and  farmer  obtain  from  time  to  time  their  supplies  from  the  mer- 
chant, and  pay  him  annually  with  their  crop.  It  may  be  said, 
generally,  that,  with  respect  to  the  state  of  society,  the  want  and 
demand  for  currency  increase  in  proportion  to  the  density  of  the 
population,  the  consequent  multiplication  and  growth  of  towns, 
and  the  division  of  labor.  And  these  being  almost  exclusively 
the  result  of  the  increasing  growth,  prosperity,  and  wealth  of  a 
country,  it  may  be  correctly  asserted,  that  the  demand  for  cur- 
rency in  any  country  is  generally  proportionate  to  its  wealth. 

That  demand  increases  in  proportion  to  that  of  population, 
only  in  as  far  as  population  is  a  principal  element  of  wealth  ;  and 
both  will  increase  together,  nearly  in  the  same  proportion,  in  a 
country  which  in  other  respects  is  nearly  stationary.  But  the 
ratio  of  the  population  to  the  actual  amount  of  currency,  which 
always  corresponds  nearly  with  the  demand  for  it,  will  be  found 
to  differ  materially  in  various  countries,  according  to  the  pro- 
ductiveness of  labor,  to  the  accumulated  amount  of  products  of 
labor  or  capital,  and  generally  to  the  wealth  of  each  respectively. 
The  perpetual  melting  of  coins,  makes,  indeed,  the  amount  of 
coinage  alone,  and  without  many  subsidiary  investigations,  a  very 
imperfect  criterion  of  the  amount  of  gold  and  silver  coins  exist- 
ing in  any  country.  A  much  more  correct  estimate  may  be  made, 
where  paper  or  debased  coin,  neither  of  which  can  be  advantage- 
ously exported  or  used  for  any  other  purpose,  constitute  the  whole 
or  greatest  part  of  the  currency.  And  resorting  to  both  means^ 
an  approximation  sufficient  for  the  purpose  may  be  obtained. 

We  learn  from  Storch,  that  the  paper  money  of  Russia,  amount- 
ed, in  1812 — 1814,  to  five  hundred  and  seventy-seven  millions 
of  rubles,  and  the  copper  currency  to  about  twenty-five  millions. 
Both  being  depreciated  to  one-fourth  part  of  their  nominal  value, 
were  equivalent  to  one  hundred  and  fifty  millions  of  silver  ru- 
bles; to  which  adding  the  estimated  amount  of  twenty-five  mil- 
lions of  silver  rubles  still  in  circulation,  gives  a  total  of  one  hun- 
dred and  seventy-five  millions,  equal  to  less  than  one  hundred 
and  thirty-two  millions  of  dollars.  The  paper  circulates,  almost 
through  the  whole  empire,  from  Archangel  to  Odessa,  and  from 
the  banks  of  the  Dwina  to  the  confines  of  Asia.  Excluding  Riga, 
Courland,  and  the  Asiatic  provinces,  the  one  hundred  and  thirty- 
two  millions  of  dollars  are  the  total  value  of  currency,  for  at 
least  thirty-five  millions  of  souls,  that  is  to  say,  at  the  rate  of 
less  than  four  dollars  a  head. 


ieJ  B.Vi^KS  AiXD  CURRENCY. 

it  will  hereafter  be  shown,  that  the  amount  of  currency  of  the 

United  States,  did  not,  in  1829,  probably  exceed  seventy-three 
millions  of  dollars,  or  at  the  rate  of  about  six  dollars  a  head ;  a 
result  nearly  the  Same  as  that  of  the  year  1819.  The  reasons, 
why  the  amount  is  less  than  might  have  been  inferred,  from  the 
extensive  commerce  of  the  United  States,  and  the  wealth  of  our 
large  cities,  have  already  been  briefly  indicated. 

In  France,  where  great  pains  have  been  taken  to  ascertain 
the  facts,  as  far  as  it  is  practicable,  in  a  country,  nine-tenths  at 
least  of  the  currency  of  which  consist  of  the  precious  metals,  the 
estimates  vary,  for  ditferent  years  and  different  amounts  of  popu- 
lation, from  two  thousand  to  two  thousand  five  hundred  millions 
of  francs,  but  only  from  seventy-two  to  eighty  francs,  or  from 
thirteen  and  a  half  to  fifteen  dollars  a  head. 

The  bank  notes  of  the  Bank  of  England,  and  of  country  banks, 
amounted,  in  the  year  1811,  to  forty-four  and  a  half  millions 
sterling,  and  those  of  Scotland  to  three  millions  and  a  half,  equiva- 
lent, together,  to  about  forty-four  millions  specie,  to  which  add- 
ing about  four  millions'  worth  of  debased  silver,  gives,  on  a  popu- 
lation of  about  twelve  millions  of  souls,  about  £4  sterling,  or  19 
dollars  a  head.  In  1829,  the  amount  has  be%n  stated  to  be  twenty- 
two  millions  in  gold,  eight  millions  in  silver,  and  twenty-eight 
millions  in  English  bank  notes,  to  which,  adding  four  millions 
of  Scotch  notes,  gives  sixty-two  millions,  or  about  the  same 
result  in  proportion  to  the  population ;  since  this,  allowing  the 
same  rate  of  increase  since  1821,  as  between  1811  and  1821, 
must  now  amount  to  between  fifteen  and  sixteen  millions  of 
souls.  But,  including  the  population  and  the  bank  notes  of 
Ireland,  we  would  have  a  population  of  about  twenty-three 
millions,  and  a  currency  of  about  sixty -six  millions  sterling,  or, 
as  in  France,  about  fourteen  dollars  a  head. 

From  these  and  more  imperfect  data,  in  relation  to  other 
countries,  we  believe  that  the  total  amount  of  currency  in 
Europe  and  America,  may  be  estimated  at  two  thousand  to 
two  thousand  three  hundred  millions  of  dollars ;  three-fourths 
of  which  consist  of  the  precious  metals,  and  the  residue  of 
bank  notes  and  irredeemable  paper  money. 

The  amount  in  weight  or  quantity  of  gold  and  silver,  is  now 
fifteen  times  as  great  in  Europe  and  America,  as  it  was  prior 
to  the  discovery  of  the  last  country.  But  the  three  hundred 
millions  previously  existing,  were  then  worth  as  much  as  twelve  • 
hundred  millions  at  this  time.  The  increase,  so  far  as  it  con- 
sists only  in  amount,  and  has  been  caused  by  the  reduced  cost 
of  production,  is,  with  respect  to  currency,  of  no  importance 
whatever.  It  is  quite  immaterial  to  the  community,  whether 
one  thousand  ounces  of  silver,  will,  on  an  average,  purchase 
one  thousand  or  four  thousand  given  measures  or  weights  of 
every  other  commodity.     Had  not  that  reduction  taken  place, 


BANKS  AND  CURREWeT.  17 

four  hundred  .thousand  millions  of  dollars  in  currency  would 
have  answered  the  same  purpose  as  is  now  effected  by  sixteen 
hundred  thousand  millions,  without  any  other  difference,  than 
probably  the  use  of  coins  of  base  metal,  instead  of  our  dimes 
and  half  dimes.  But  the  increase  from  twelve  hundred  mil- 
lions, (the  present  worth  of  the  former  three  hundred  millions,) 
to  four  thousand  five  hundred  millions,  is  an  increase  in  value, 
and  indicates  a  corresponding,  and,  on  account  of  the  numer- 
ous substitutes  for  currency  introduced  by  commerce  and 
credit,  a  still  greater  proportionate  increase  of  the  wealth  and 
prosperity  of  Europe  and  America  together,  during  the  two 
last  centuries.  That  increase  of  value  has  no  otherwise  con- 
tributed to  this  increased  wealth,  than  as  far  as  it  has  added 
to  the  amount  of  exchangeable  commodities ;  and  the  same 
effect  would  have  been  produced  by  a  similar  increase  in  any 
other  commodity.  The  increased  wealth  and  prosperity  of 
Europe  and  America  are  the  cause,  and  not  the  effect,  of  the 
iijcreased  amount  in  value  of  gold  and  silver,  which  they  now 
possess.  The  causes  of  that  great  increase  of  wealth,  are  not 
to  be  found  in  the  fertility  of  the  mines  of  America,  but  in  the 
general  progress  of  knowledge,  skill,  and  every  species  of  in- 
dustry, in  the  consequent  improvement  of  governments,  laws, 
and  habits,  in  all  that  constitutes  what  is  called  civilization. 
The  influx  of  precious  metals  follows  in  every  country,  and 
does  not  precede  the  corresponding  increase  of  wealth. 

As  the  regularity  of  the  annual  supply  of  the  precious 
metals  is  not  affected  by  the  seasons,  the  changes  in  the  amount 
of  that  supply,  had,  during  the  two  last  centuries,  been  grad- 
ual, and  hardly  sensible  from  year  to  year.  That,  which  has 
taken  place  within  the  last  twenty  years,  has  been  greater 
than  had  been  experienced,  since  the  first  great  revolution 
caused  by  the  discovery  of  America,  The  annual  supply  of 
the  mines  of  America,  Asia,  and  Europe,  had  reached  its  high- 
est point,  in  the  years  1803-1810,  and  amounted  then  to  fifty 
millions  of  dollars,  or  to  about  one  and  one-fourth  per  cent,  of 
the  whole  quantity  of  precious  metals  then  existing  in  Europe 
and  America.  The  convulsions  of  the  former  Spanish  colonies 
have,  for  the  last  twenty  years,  reduced  the  total  annual  sup- 
ply to  about  twenty-seven  millions,  or  to  about  three-fifths  per 
cent,  of  the  whole  amount  now  existing.  A  diminution  of  one- 
half  of  the  ordinary  supply  of  any  other  commodity,  the  de- 
mand remaining  the  same,  would  have  produced  a  still  greater 
proportionate  increase  in  its  price.  Continued  during  twenty 
years,  this  diminished  supply  of  the  precipus  metals,  whilst  the 
demand  is  still  gradually  increasing,  cannot  but  have  aflected, 
in  some  degree,  their  price  ;  and  if  prolonged  much  longer,  the 
effect  would  be  visible ;  but  it  has  been  gradual,  from  year  to 
year  imperceptible,  and  affecting  in  no  sensible  manner  the 


18  BANKS  AND  CURRENCY. 

performance  of  contracts.  This  is  obviously  due  to  the  Com- 
parative small  amount  of  the  ordinary  supply,  which  does  not 
exceed  one  hundredth  part  of  the  stock  on  hand,  whilst  the 
annual  supply  of  corn  and  of  most  other  natural  products  al- 
ways exceeds,  and  that  of  most  manufactured  articles  often 
equals,  the  amount  of  the  old  stock.  The  superior  durability 
and  value  of  the  precious  metals,  over  every  other  substance 
(including  even  iron,  copper,  and  other  metals)  fitted  for  a  cir- 
culating medium,  which  produce  and  preserve  the  great  accu- 
mulation of  gold  and  silver,  are  the  principal  cause  of  their 
great  superiority  over  every  other  commodity,  as  a  permanent 
standard  of  value. 

For  the  same  reasons,  any  accidental  inequality  in  the  dis- 
tribution of  the  precious  metals,  amongst  the  several  countries, 
in  proportion  to  their  respective  wants,  is  promptly  and  easily 
repaired;  and  any  extraordinary  demand  from  a  particular 
country  met  without  difficulty,  or  sensibly  affecting  the  price 
of  the  metal  required.  The  general  supply  of  stock  on  hand, 
is  always  sufficient  to  meet  such  demand,  and  the  expenses 
and  charges  of  transportation  are,  on  account  of  the  greater 
talue  of  an  equal  bulk,  far  less  than  those  of  any  other  com- 
modity, hardly  ever  exceeding  in  time  of  peace  one  per  cent, 
on  the  value,  even  when  brought  from  the  most  distant  countries 
of  the  civilized  world.  During  the  four  years  which  immedi- 
ately followed  the  resumption  of  specie  payments  in  England, 
that  occurrence  caused  an  extraordinary  demand  of  more  than 
twenty  millions  sterling  in  gold,  or  about  twenty-four  millions 
of  dollars  a  year,  being  near  three  times  as  much  as  the  annual 
supply  of  that  metal ;  and  this  demand  was  met  without  any 
difficulty,  or  sensibly  enhancing  the  price  of  gold.  As  the  gold 
coins  of  France  are,  by  the  mint  regulations  of  that  country,  a 
little  overrated  in  relation  to  those  of  silver,  they  always  com- 
mand a  small  premium,  varying  generally  from  one-fifth  to 
one-half  per  cent.  This  premium  never  exceeded  the  last 
rate  during  the  years  of  that  demand ;  which  is  a  conclusive 
proof  that  it  could  not  at  most,  and  at  any  time,  have  en- 
hanced the  price  of  gold  more  than  three-tenths  per  cent.; 
since,  in  that  case,  the  advance  would  have  also  taken  place 
in  France,  whence,  in  fact,  a  considerable  portion  of  that  de- 
mand was  supplied.  This  decisive  fact  also  shows,  that  it  is 
erroneously  that  the  exportation  of  American  gold  coins,  which 
commenced  in  the  year  1821,  has  been  ascribed  to  that  extra- 
ordinary demand.  The  exportation  has  been  continued  unin- 
terruptedly, after  that  cause  had  ceased  to  operate,  and,  as 
will  be  seen  hereafter,  is  due  to  the  alteration  from  that  epoch 
in  the  rate  of  exchanges. 

But  it  is  nevertheless  true,  that  as  the  value  of  the  various 
objects  exchanged  or  sold  annually  in  a  country,  and,  what  is 


BANKS  AND  CURRENCY.  Itt 

still  more  important,  as  the  proportion  of  that  value  to  the 
amount  of  the  actual  payments  which  must  be  made  in  cur- 
rency, are  both  subject  to  variations,  the  amount  of  currency 
wanted  in  a  country  does,  exclusively  of  the  gradually  increas- 
ing demand  caused  by  an  increasing  prosperity,  vary  at  differ- 
ent times  in  the  same  country.  That  amount  ought,  therefore, 
in  prosperous  seasons,  to  exceed  that  which  is  then  necessarily 
wanted,  in  order  to  be  able  to  meet  the  greater  demand  which 
at  times  takes  place.  There  are,  in  every  country,  banks, 
bankers,  and  great  dealers,  in  whose  hands  the  currency  of  the 
•country  accumulates,  to  be  thence  again  distributed  amongst 
the  members  of  the  community,  according  to  their  respective 
^vants.  Obliged  to  meet  those  demands,  it  is  their  interest 
•and  duty  to  keep  always  those  reservoirs  sufficiently  full.  In 
countries  where  no  artificial  substitute  has  rendered  the  task 
more  difficult,  and  where  specie  is  the  sole  or  principal  cur- 
rency, although  there  may  be  occasional  varieties  in  its  value, 
they  are  of  rare  occurrence  and  restrained  within  narrow 
limits ;  and  an  actual  want  of  specie  is  hardly  ever  known. 


The  substitution  of  a  paper  currency  to  the  precious  metals, 
does  not  appear  to  be  attended  with  any  other  substantial  ad- 
vantage than  its  cheapness;  and  the  actual  benefit  may  be  cal- 
culated with  tolerable  accuracy.  If  in  a  country  which  wants 
and  does  possess  a  metallic  currency  of  seventy  millions  of  dol- 
lars, a  paper  currency  to  the  same  amount  should  be  substituted, 
the  seventy  millions  in  gold  and  silver,  being  no  longer  wanted 
for  that  purpose,  will  be  exported,  and  the  returns  may  be  con- 
verted into  a  productive  capital,  and  add  an  equal  amount  to  the 
wealth  of  the  country.  If  the  banking  system,  founded  on  the 
principle  of  a  paper  currency  convertible  at  will  into  specie, 
should  be  adopted,  and  notes  of  a  very  low  denomination  be  ex- 
cluded, it  will  be  found,  that  the  circulation  would  consist  of  about 
sixty  millions  in  bank  notes  and  ten  millions  in  silver.*  But  in 
that  case  the  banks,  in  order  to  sustain  specie  payments,  must,  on 
an  average,  have  in  their  vaults  about  twenty  millions  in  spe- 
cie. This  is  believed  to  be  nearly  the  state  of  things  at  this 
time  in  the  United  States,  if,  according  to  common  usage, 
we  consider  bank  notes  as  constituting  the  whole  of  the  paper 
currency.  There  have  been,  therefore,  on  that  principle,  only 
forty  millions  of  dollars  saved  and  added  to  the  productive  capi- 
tal of  the  country.  This,  at  the  rate  of  5  per  cent,  a-year,  may 
be  considered  as  equal  to  an  additional  annual  national  profit  of 

•  It  has  been  lately  slated,  that  the  bank  notes  of  every  description  in  Kngland, 
amount  to  fwenty-eijrht  millions  sterling;  and  the  bullion  in  the  vaults  of  tlio  bonk, 
to  thirteen  millions.  If  this  is  correet,  the  capital  saved  is  only  fifteen  millions,  and 
the  annual  profit,denved  from  the  pniwr  currency, six  iiundrcd  thoimand  jiounds  sterling. 


laO  BANKS  AND  CURftENCY. 

two  millions  of  dollars.  The  substitution  of  bank  notes  to  d 
metallic  currency  produces  the  same  effect,  as  an  addition  of 
two  millions  a-year,  to  the  exports  of  the  United  States,  or  as  a 
diminution  of  taxes  to  the  same  amount.  Being  inclined  to 
think  that  the  credits  on  the  books  of  the  banks,  called  deposits 
in  the  United  States;  constitute  to  all  intents  and  purposes  a 
part  of  their  currency,  we  believe  that  the  benefit  derived  from 
the  banking  system  is  still  greater,  and  is  tantamount  to  an  an- 
nual national  saving,  or  additional  profit,  of  near  five  millions  of 
dollars.*  This  is  certainly  an  important  advantage,  provided  the 
system  is  conducted  so  as  to  afford  complete  security ;  and  it 
would  be  altogether  free  of  objection,  if  the  banks  were  only 
banks  of  deposit  and  issued  no  paper.  Barns  are  certainly  a 
vety  expensive  implement  of  agriculture.  The  capital  expended 
on  those  buildings,  in  the  middle  and  northern  states,  is  more 
than  the  value  of  one  year's  crop  of  the  farms,  and  causes  there- 
fore a  deduction  of  more  than  5  per  cent,  on  the  annual  gross 
produce  of  the  earth.  To  dispense  with  barns  would  be  a  greater 
annual  saving,  than  that  which  arises  from  the  substitution  of'  a 
paper  to  a  metallic  currency.  Some  favorable  seasons  occur, 
when  the  farmer  might  thresh  his  wheat  on  a  temporary  floor 
exposed  to  the  weather,  and  dispense  with  a  barn.  Yet,  in  our 
climate,  every  prudent  farmer  prefers  security  to  a  precarious 
advantage,  and  would  consider  it  a  most  wretched  economy,  not 
to  incur  the  expense  necessary  for  that  object.  Similar  is  the 
economy  of  that  expensive  instrument,  the  precious  nfietals,  if 
the  substituted  paper  currency  is  insecure.  To  unite  that  secu- 
rity, which  is  derived  from  a  uniform  and  permanent  standard 
of  value,  with  the  acknowledged  and  considerable  saving  arising 
from  the  substitution,  is  the  difficult  problem  to  be  solved,  in 
every  country  that  resorts  to  that  cheaper  species  of  circulating 
medium. 

A  paper  currency  is  either  convertible  at  will  into  specie,  or 
redeemable  at  some  future  time,  or  altogether  irredeemable.  The 
two  last  descriptions  are  excluded  by  the  Constitution  of  the 
United  States,  and  require  examination,  only  because  experience 
has  shoVv-n,  that  a  currency  of  the  first  description  may  degene- 
rate into  one  not  convertible  into  specie,  without,  on  that  ac- 
count, ceasing  to  be  the  only  currency  of  the  country.  Some 
persons  are  yet  found  who  contend  for  issues  of  paper  money 
to  an  indefinite  amount,  without  regard  to  the  fundamental 
principle,  that  the  demand  is  for  value,  and  that  it  is  impossible 

*  We  do  not  fake  into  consideration  the  annual  amount  wanted  to  repair  the  loss 
occasioned  by  friction  in  gold  and  silver  coins.  This  has  been  greatly  overrated  by 
respectable  British  writers,  bat  according  to  the  various  opinions  deduced  from  ac- 
tual experiments,  cannot  exceed,  taking  the  highest  computation,  and  is  probably 
less,  than  seventy  thousand  dollars  a-year,  on  a  coinage  of  forty  millionei. 


BANKS  AND  CURRENCY.  21 

$0  Increase  the  amount  of  currency  beyond  certain  limits,  with- 
out producing  a  corresponding  depreciation  in  its  value.  A 
recurrence  to  that  principle  is  sufficient  to  dissipate  the  singu- 
lar illusion  under  which  that  opinion  is  advanced. 

We  find,  in  a  paper  laid  before  the  Senate  during  their  last 
•session,  that,  according  to  the  increase  of  population  since  the 
year  1820,  there  ought  to  have  been,  since  that  time,  a  demand 
for  thirty-two  millions  of  acres  of  the  public  lands,  which,  at 
the  present  price  of  1^  dollars  per  acre,  would  have  yielded 
forty  millions  of  dollars,  (or  four  millions  a-year,)  whilst  the 
annual  sales  amount  only  to  one  million,  "  the  reason  for  which 
is  want  of  money  to  purchase."  The  remedy  proposed  in  the 
sequel,  is  an  issue  of  paper  money  by  government,  the  general 
benefit  of  which,  according  to  the  writer,  would  be  stupendous. 
"Were  our  own  government  to  increase  our  circulating  medium 
only  fifty  millions  of  dollars,  income-yielding  property  would  rise 
two  thousand  millions  of  dollars." 

The  word  "  money"  is  used  as  synonymous  with  specie  and 
currency.  But  as  currency  is  the  thing  by  which  every  thing 
else  is  valued,  the  value  of  every  species  of  property  is  expressed 
in  currency.  A  planter,  possessed  of  property,  which,  in  usual 
times,  might  be  sold  for  one  hundred  thousand  dollars,  is  accord- 
ingly said  to  be  worth  one  hundred  thousand  dollars,  though  he 
may  not,  at  any  one  time,  have  in  his  possession  one  thousand 
dollars  in  currency.  The  word  money  comes  thus  to  be  used  as 
synonymous  with  wealth ;  and,  in  that  sense  of  the  word,  M'e 
agree  with  the  respectable  writer  of  the  paper  in  question,  that 
the  reason  why  the  sales  of  the  public  lands  have  not  far  exceed- 
ed one  million  of  dollars  a-year,  has  been  the  want  of  money, 
that  is  to  say,  of  wealth  on  the  part  of  those  who  would  have 
wished  to  purchase.  From  the  other  writings  of  the  same  author, 
we  had  concluded,  that  he  was  in  favor  of  issues  of  paper  money 
almost  to  an  indefinite  amount.  But  it  appears  by  this  paper, 
that  he  is  perfectly  aware,  that  a  very  limited  amount  of  currency 
is  sufficient ;  since  he  avers  that  an  additional  issue  of  fifty  mil- 
lions would  produce,  on  the  value  of  tbe  productive  property  of 
•the  country,  an  effect  forty  times  as  great  as  that  issue.  This  re- 
duces the  question  to  one  of  quantity,  and  whether  the  amount 
of  currency  supplied  by  the  banking  system  now  existing  is 
insufficient,  and  ought  to  be  increased  by  an  issue  of  government 
paper.  As  it  is  the  interest  of  the  banks  to  issue  as  many  notes 
as  can  be  kept  in  circukition,  and  as  they  arc  authorized  by  their 
charters  to  issue  more  than  three  times  the  present  amount,  it  is 
■clear  that  the  obligation  to  pay  their  notes  in  specie  on  demand 
is  the  sole  reason  why  that  :imount  is  not  greater.  It  is,  there- 
fore, absolutely  necessary,  in  order  to  enlarge  it,  that  the  pro- 
posed new  issue  should  consist  of  a  government  paper  money, 
not  convertible  into  specie  on  demand.     It  coula  not,  accord- 


<23  BANKS  AND  CURRENCY. 

ing  to  the  Constitution,  be  made  a  legal  tender  for  the  payment 
of  debts  between  individuals,  and  might  only  be  made  receivable 
in  payment  of  debts  due  to  the  United  States.  It  is  evident  that 
such  paper  could  not  circulate  a  single  day  in  competition  v^'ith 
that  of  the  banks,  which  is  received  not  only  for  that  purpose, 
but  in  payment  of  all  debts,  and  is  at  all  times  convertible  into 
specie.  The  new  paper  would  be  immediately  depreciated  in 
proportion  to  its  amount,  and  produce  no  other  effect  than  that 
of  lessening  the  revenue  of  the  United  States  in  the  same  pro- 
portion. It  would  be  much  more  simple,  if  that  was  the  object, 
to  reduce  the  rate  of  existing  taxes ;  with  respect  to  the  public 
lands,  to  reduce  the  price  at  which  they  are  now  sold.  We  be- 
lieve that  this  last  measure  would  be  equally  just  and  consistent 
with  sound  policy,  and  that  the  great  change  of  circumstances 
which  has  taken  place,  and  principally  the  superabundant  sup- 
ply of  public  lands,  compared  with  the  effective  demand  at  the 
present  price,  imperatively  require  a  reduction  of  that  price. 
Those  lands  are  the  property  of  the  people  of  the  United  States 
at  large,  and  cannot  be  given  gratuitously  either  to  particular 
individuals  or  to  particular  states.  But  they  should  not  be  kept 
out  of  market  by  persevering  in  a  price,  that  was  adapted  to  the 
time  when  it  was  fixed,  and  no  longer  accords,  either  with  the 
,greatness  of  the  supply,  or  with  the  wealth  of  the  natural  pur- 
chasers, of  those  who  want  them  for  their  own  use,  and  who 
may,  if  the  expression  is  admissible,  be  considered  as  the  con- 
sumers of  that  commodity. 

But  supposing,  for  the  sake  of  argument,  that  this  additional 
issue  of  paper  by  government  should  not  experience  any  depre- 
ciation, and  should  circulate  at  the  same  rate,  as  bank  notes 
convertible  on  demand  into  specie,  not  the  slightest  advantage 
would  accrue  to  the  purchaser  of  public  lands,  or  to  any  other 
individual.  If  not  depreciated,  the  same  quantity  of  labor,  of 
wheat,  or  of  any  other  commodity,  will  be  necessary,  and  must 
be  given,  in  order  to  obtain  an  equal  quantity  either  of  that 
paper,  of  bank  notes,  or  of  specie.  If  depreciated  and  circu- 
lating, the  farmer  might  indeed  obtain  two  dollars  of  that  paper, 
instead  of  one  in  specie,  for  a  bushel  of  wheat,  and  the  laborer 
receive  one  dollar  nominal,  instead  of  half  a  dollar  in  specie, 
for  a  day's  labor.  But  what  benefit  would  arise  to  either? 
Since  the  farmer  would  be  obliged  to  pay  also  a  double  nominal 
price  for  the  labor  he  wanted,  and  the  laborer  a  similar  double 
price  for  the  farmer's  wheat,  and  since  both  would  likewise  be 
.obliged  to  give  a  double  price  for  any  article  they  might  want, 
when  paid  with  that  paper.  This  is  so  simple  and  obvious,  that 
we  are  entirely  unable  to  understand  on  what  grounds  the  con- 
trary doctrine  can  be  sustained.  After  having  tried  to  discover 
what  was  meant  by  those  who  pretend  to  argue  in  support  of 
excessive  issues  of  paper  money,  we  have  found  nothing  but  a 


BANKS  AiND  CURRENCY.  23 

repetition  of  the  erroneous  assertions,  on  which  the  famous  Law 
attempted  to  build  the  stupendous  scheme  which  bears  his  name 
and  desolated  France  in  the  year  1720.  He  asserted,  1st,  that 
gold  and  silver  were  only  the  representative  or  sign  of  wealth ; 
2d,  that  paper  might  be  that  sign  as  well  as  the  precious 
metals;  3d,  that  by  doubling  or  trebling  the  amount  of  that 
sign,  the  national  wealth  would  be  increased  to  that  amount ; 
4th,  that  such  increase  of  the  currency  would  reduce  the  rate 
of  interest,  and  thereby  promote  industry.  It  is  hardly  neces- 
sary to  show  that  those  assertions  are  a  series  of  errors.  The 
precious  metals  are  not  merely  the  sign  or  representative  of 
Wealth ;  they  have  an  intrinsic  value,  on  account  of  the  cost  of 
their  production,  and  of  the  demand  for  other  uses  than  cur- 
rency, and  are  therefore  wealth  itself.  It  is  because  they  have 
an  intrinsic  and  comparatively  stable  value,  that  they  have 
become  the  standard  of  the  value  of  every  other  commodity, 
or,  according  to  Law's  vocabulary,  the  representative  or  sign 
of  wealth.  A  certain  quantity  of  those  signs  is  necessary  for  a 
circulating  medium ;  but  the  quantity  used  adds  nothing  more 
to  the  wealth  of  any  country,  than  the  intrinsic  value  of  that 
quantity.  Paper  having  no  intrinsic  value,  never  can,  whatever 
its  amount  may  be,  add  any  thing  directly  to  the  national 
wealth.  Its  utility  consists  in  the  substitution  of  a  sign  of  no 
value  for  a  sign  which  has  an  intrinsic  value,  and  which  may, 
on  that  account,  be  used  advantageously  for  other  purposes 
than  that  of  a  sign.  Having  performed  that  office,  the  increase 
of  paper,  beyond  the  amount  of  the  valuable  sign  of  which  it 
takes  the  place,  neither  adds  nor  produces  any  wealth.  The 
multiplication  of  the  signs,  beyond  the  amount  in  value  wanted, 
can  have  no  other  effect  than  that  of  depreciating  their  nominal 
value,  and  has  none  on  the  rate  of  interest,  which  depends,  not 
on  the  amount  of  those  signs,  or  of  currency,  but  on  the  pro- 
portion between  the  amount  or  supply  of  capital  which  may 
be  loaned,  and  the  demand  for  that  capital.  The  result  of 
Law's  scheme  was  a  fatal  illustration  of  his  doctrines.  By  a 
series  of  arbitrary  acts  on  the  part  of  government,  and  by  con- 
necting some  splendid  and  illusory  schemes  with  the  bank,  he 
succeeded  in  putting  in  circulation  about  four  hundred  and 
twenty  millions  of  dollars  in  bank  notes,  or  more  than  twice 
the  amount  of  the  currency  then  wanted  in  France.  This 
paper  was  made  a  legal  tender,  to  the  total  exclusion  of  the 
precious  metals.  But  the  laws,  and  all  the  power  of  the  French 
government,  were  unequal  to  the  task  of  sustaining  that  excess 
of  currency.  The  price  of  every  species  of  merchandise  natu- 
rally rose  100  per  cent.  Government,  with  a  view  probably 
to  prevent  a  total  catastrophe,  reduced  by  a  decree  the  notes 
to  one  half  of  their  nominal  value.  The  bubble  burst' instan- 
taneously-    The  whole  currency  of  the  country,  the  four  htm- 


94  BANKS  AND  CURRENCY. 

dred  and  fifty  millions  dollars  of  bank  notes,  could  not,  the  next 
day,  have  been  sold  for  the  value  of  the  paper  on  which  they 
were  printed.  They  were  subsequently  funded  at  the  rate  of 
eighty  for  one.  The  public  creditors,  who  had  been  paid  in 
notes,  lost  one  hundred  and  fifty  millions  of  their  capital.  Some 
speculators  in  shares  were  enriched ;  all  the  actual  stockholders 
were  ruined ;  and  the  calamity  extended  to  all  the  industrious 
and  productive  part  of  the  community.  Since  that  time  banks 
have  not  been  connected  with  such  gross  commercial  bubbles. 
But  in  England,  the  South  Sea  scheme,  and  the  joint  stock 
companies  of  the  year  1825,  were  erected  on  the  model  of  the 
Mississippi  Company  of  Law ;  and  the  Assignats  of  the  French 
revolution,  as  well  as  all  the  other  attempts  to  substitute  an 
excessive  issue  of  pure  paper  money  to  a  metallic  currency, 
have  been  but  copies  of  his  bank  notes. 

It  has  been  contended  by  distinguished  writers  of  a  very  dif- 
ferent description,  that  an  irredeemable  paper  currency,  not 
exceeding  in  its  nominal  amount  that  in  value  which  is  actually 
wanted,  might  be  altogether  substituted  to  gold  and  silver,  pro- 
vided that  government  should  always  regulate  the  issues  so  as 
never  to  exceed  or  fall  short  of  that  amount.  The  advantage 
of  such  paper,  over  notes  convertible  on  demand  in  specie, 
would  consist  in  saving  the  expense  of  the  gold  and  silver  ne- 
cessary to  pay  such  notes  at  the  will  of  the  holders,  and  in  pro- 
tecting the  currency  against  both  a  panic,  and  the  consequences 
of  any  great  drain  of  the  precious  metals  from  abroad ;  dangers 
to  both  of  which  notes  payable  in  specie  are  exposed.  It  must, 
in  the  first  place,  be  observed,  that  the  unavoidable  eifect  of 
an  increased  or  diminished  value  of  the  currency,  arising  from 
contraction  or  excess  of  its  amount  beyond  certain  limits,  is  ul- 
timately to  sink  or  to  raise  the  price  of  every  other  commodity. 
But  this  change  may  not  affect  immediately  the  price  of  the 
commodities  or  of  the  labor  applied  to  objects  not  susceptible 
of  being  exported ;  and  that  of  exportable  commodities  is 
often  affected  by  variations  in  the  relative  amount  of  supply 
and  demand,  which  are  altogether  foreign  to  the  state  of  the 
currency.  The  wisest  government,  with  the  purest  views, 
never  has  any  other  means  of  ascertaining,  whether  the  amount 
of  a  paper  money  is  too  limited  or  excessive,  than  the  price  of 
the  precious  metals  in  such  paper,  because  those  metals  are,  of 
all  others,  the  commodity  least  liable  to  variations  in  its  value. 
The  rate  of  exchanges  may  occasionally  be  a  more  sensitive 
test,  but  is  in  reality  a  more  circviitous  and  less  certain  mode  of 
resorting  to  the  same  standard  of  value.  Thus  government  has 
no  means  to  ascertain,  whether  its  issues  are  too  contracted  or 
too  large,  till  after  the  evil  has  actually  taken  place ;  whilst 
banks,  ojjjiged  to  pay  their  notes  in  specie,  and  skilfully  direct- 
ed, are  constantly  employed  in  preventing  its  occurrence.     But 


BANKS  AND  CURIIENCT.  35 

supposing  government  to  be  endowed  with  such  skill  as  to  be 
able  always  to  adjust  the  proper  amount  of  currency;  an  amount 
which,  if  this  is  metallic,  adjusts  itself,  and  which,  by  banks 
properly  conducted,  may  be  tolerably  well  regulated ;  there  is 
still  an  ingredient,  inherent  to  paper  not  convertible  on  demand 
in  specie,  which  no  human  skill  can  control.  This  is  public 
opinion,  with  respect  to  future  contingencies,  and  therefore 
purely  conjectural. 

It  has  been  asserted,  that  the  value  of  an  irredeemable  paper 
money  is  altogether  regulated  by  its  amount,  and  does  not,  or  at 
least  ought  not,  to  depend  on  confidence  in  the  solvency  of  the 
government  by  which  it  is  issued.  The  last  assertion  may  be 
strictly  true,  though  we  believe,  that  in  point  of  fact,  there  has 
hardly  been  any  issue  of  paper,  which  in  its  origin  was  not 
founded  on  an  explicit  or  implied  promise  to  redeem  it.  But,  if 
not  depending  on  confidence  in  the  solvency,  the  value  of  the 
paper  will  most  certainly  be  atfected  by  the  public  confidence 
in  the  skill,  discretion,  and  probity  of  government,  these  being 
the  only  guarantees  against  excessive  issues,  and  experience 
having  but  too  well  proved  the  natural  disposition  of  every  gov- 
ernment which  ever  did  issue  paper,  to  resort,  whenever  pressed 
by  its  exigencies,  to  that  resource,  without  regard  to  amount 
and  consequences.  Our  principal  concern,  however,  is  with 
paper,  originally  convertible  on  demand  in  specie,  and  which 
has  degenerated  into  a  paper,  the  redemption  of  which  is  in- 
definitely postponed.  It  is  evident  that  the  value  of  such  cur- 
rency must  depend,  at  least  in  part,  on  the  probability  of  its 
being  ever  redeemed,  or  of  specie  payments  being  resumed,  and 
of  the  time  when  this  will  take  place.  And  as  there  lies  the 
danger  to  which  the  currency  of  the  United  States  is  exposed, 
we  will  illustrate  that  position  by  some  instances. 

The  paper  money  issued  by  Congress  during  the  war  of  the 
American  independence,  experienced  no  sensible  depreciation 
before  the  year  177G,  and  so  long  as  the  amount  did  not  exceed 
nine  millions  of  dollars.  A  paper  ciirrency,  equal  in  value  to 
that  sum  in  gold  or  silver,  could  therefore  be  sustained  so  long 
as  confidence  was  preserved.  The  issues  were  gradually  in- 
creased during  the  ensuing  years,  and  in  April  1778,  amounted 
to  thirty  millions.  A  depreciation  was  the  natural  consequence; 
but  had  the  value  of  the  paper  depended  solely  on  its  amount, 
the  whole  quantity  in  circulation  would  have  still  been  equal  in 
value  to  nine  millions,  and  the  depreciation  should  not  have 
been  more  than  3^  to  1 ;  instead  of  which,  it  was  then  at  the 
rate  of  six  dollars  in  paper  for  one  silver  dollar,  and  the  whole 
amount  of  the  paper  in  circulation  was  worth  only  live  millions 
in  silver.  It  is  obvious  that  the  diflTerence  was  due  to  lessened 
confidence.  The  capture  of  Burgoyne's  army  was  followed  l)y 
♦he  allinnre  with  Franco,  and  her  becoming  a  party  to  the  war 


26  BANKS  AND  CURRENCY. 

against  England.  The  result  of  the  war  was  no  longer  consid- 
ered as  doubtful,  and  sanguine  expectations  were  formed  of  its 
speedy  termination.  The  paper  accordingly  rose  in  value ;  and 
in  June,  1778,  although  the  issues  had  been  increased  to  more 
than  forty-five  millions,  the  depreciation  was  at  the  rate  of  only 
four  to  one.  From  the  end  of  April  of  that  year,  to  the  month 
of  February,  1779,  although  the  issues  had  been  increased  from 
thirty-five  to  one  hundred  and  fifteen  millions,  the  average  value 
in  silver  of  the  whole  amount  of  paper  in  circulation  exceeded 
ten  millions,  and  it  was  at  one  time  nearly  thirteen  millions,  or 
considerably  more  than  that  which  could  be  sustained  at  the  out- 
set of  the  hostilities.  But  when  it  was  discovered,  that  the  war 
would  be  of  longer  continuance,  confidence  in  the  redemption 
of  a  paper  money,  daily  increasing  in  amount,  was  again  sud- 
denly lessened.  The  depreciation  increased  from  the  rate  of  6 
to  that  of  30  to  1  in  nine  months.  The  average  value  in  silver 
of  the  whole  amount  of  paper  in  circulation  from  April  to  Sep- 
tember 1779,  was  about  six  millions,  and  it  sunk  below  five 
during  the  end  of  the  year.  The  total  amount  of  the  paper  was 
at  that  time  two  hundred  millions;  and  although  no  further 
issues  took  place,  and  a  portion  was  absorbed  by  the  loan  offices 
and  by  taxes,  the  depreciation  still  increased,  and  was  at  the 
end  of  the  year  1780  at  the  rate  of  80  dollars  in  paper  for  1  in 
silver.  The  value  in  silver  of  the  paper  currency,  was  then 
less  than  two  millions  and  a  half  of  dollars ;  and  when  Congress, 
in  March  following,  acknowledged  the  depreciation,  and  offered 
to  exchange  the  old  for  new  paper  at  the  rate  of  40  for  one,  the 
old  sunk  in  one  day  to  nothing,  and  the  new  shared  the  same 
fate. 

The  aggregate  of  bank  notes  of  the  Bank  of  England  and 
country  banks  was  nearly  the  same  in  the  years  1810, 1813,  and 
1818,  being,  for  each  of  those  years  respectively,  about  forty- 
six  millions,  forty-six  millions  two  hundred  thousand,  and  forty- 
six  millions  seven  hundred  thousand  pounds  sterling ;  and 
the  value  in  gold  of  the  aggregate  amount  of  notes  was,  for  each 
of  those  years  respectively,  forty,  thirty-five  and  a  half,  and  for- 
ty-five and  a  half  millions.  A  result  nearly  similar,  will  be 
found  by  comparing  periods  of  years.  The  average  amount  of 
the  notes  in  circulation  was  about  forty-six  millions  for  the  years 
1810,  1811  ;  forty-five  millions  two  hundred  thousand  for  the 
years  1812  to  1816;  and  forty-four  millions  four  hundred  thou- 
sand for  the  years  1817  to  1819;  and  the  average  value  in 
gold  of  those  notes,  for  each  of  those  periods  respectively,  was 
forty-one,  thirty-six,  and  forty-three  millions.  It  is  obvious 
that  those  differences,  in  the  respective  value  in  gold  of  the 
whole  amount  of  the  currency,  did  not  depend  on  its  amount, 
but  on  the  opinion  entertained,  either  of  the  probable  increase 
or  contraction  of  the  notes,  or  of  the  resumption  of  the  specie 


BANKS  AND  CURUliNCY.  27 

payments.  Had  the  depreciation  of  the  notes  depended  solely 
on  their  excess,  it  would  have  been  nearly  the  same  in  the  years 
1810,  1813,  and  1818,  when  that  amount  was  nearly  the  same. 
Reducing  into  gold  the  value  of  the  whole  currency,  no  other 
reason  can  be  assigned  but  a  greater  or  less  degree  of  confidence, 
why  a  paper  currency  worth  forty-five  and  a  half  millions  could 
be  sustained  in  1818,  whilst  no  greater  value  than  thirty-five 
and  a  half  millions  circulated  in  1813.  Itisnideed  evident,  that 
the  confidence  in  the  resumption  of  specie  payments  must  have 
been  greater  in  1810,  and  much  greater  in  1818,  than  in  1813; 
and  that,  independent  of  the  intrinsic  value  of  the  bank  notes, 
as  regulated  by  their  amount,  they  must,  whenever  depreciated, 
acquire  some  additional  value,  according  to  the  opinion  enter- 
tained of  their  being  again  converted  into  specie,  and  of  the  prox- 
imity of  that  event. 

A  still  more  striking  instance  of  the  sudden  alterations  in 
value,  to  which  notes  not  convertible  into  specie  are  liable,  is  to 
be  found  in  that  which  took  place  in  England,  in  the  spring  of 
1815,  on  the  landing  of  Bonaparte  from  the  Island  of  Elba.  The 
bank  notes  had  gradually  risen  in  value  since  the  peace,  and 
were  not  depreciated  more  than  12^  per  cent,  in  the  beginning 
of  March.  Towards  the  end  of  that  month,  and  within  less  than 
a  fortnight,  the  depreciation  was  25  per  cent,  although  there 
had  been,  during  that  time,  neither  additional  issues  of  paper, 
nor  exportation  of  the  precious  metals.  We  will  quote  only  one 
more  instance  of  a  similar  nature.  During  the  general  suspen- 
sion of  specie  payments  in  the  United  States,  the  depreciation 
of  the  bank  notes  varied  in  the  several  sea-ports.  Those  of  the 
Baltimore  banks  were  at  20  per  cent,  discount  in  January  181.'). 
The  Treaty  of  Peace  was  ratified  and  published  in  the  month  of 
February ;  and  as  the  suspension  of  specie  payments  had  not 
lasted  six  months,  and  was  caused  by  the  war,  a  general  expec- 
tation immediately  prevailed,  that  those  payments  would  be 
forthwith  resumed.  Accordingly,  bank  notes  rose  everywlure 
in  value,  and,  in  March,  the  discount  on  those  of  Baltimore  was 
only  5  per  cent.  As  that  expectation  was  disappointed,  the  notes 
again  sunk  in  value,  and,  in  July,  those  of  Baltimore  were  again 
at  a  discount  of  20  per  cent.  It  is  believed,  that  no  doubt  cnn 
remain,  that  a  paper  currency  liable  to  fluctuations  like  those, 
and  originating  in  causes  that  bafile  all  calculation,  never  can, 
by  any  skill  wliatcver,  be  made  a  stable  standard  of  value. 

The  paper  currency  of  the  United  States  is  of  a  very  dif- 
ferent character,  and,  according  to  the  general  acceptation  of 
that  term,  consists  almost  exclusively  of  bank  notes  payable  on 
demand  in  specie.  It  may  however  be  questioned,  whether  thfre 
are  not  other  species  of  paper  founded  on  credit,  which  ought 
to  be  considered  as  making  part  of  the  currency,  and  not  merely 
as  substitute-. 


2S  BANKS  AND  CURRENCY. 

There  are  in  England,  where  incorporated  country  banks, 
issuing  paper,  are  as  numerous,  and  have  been  attended  with 
the  same  advantages  and  the  same  evils  as  our  country  banks, 
some  extensive  districts,  highly  industrious  and  prosperous,  where 
no  such  bank  does  exist,  and  where  that  want  is  supplied  by 
bills  of  exchange  drawn  on  London.  This  is  the  case  in  Lan- 
cashire, which  includes  Liverpool  and  Manchester,  and  where 
such  bills,  drawn  at  ninety  days  after  date,  are  indorsed  by  each 
successive  holder,  and  circulate  through  numerous  persons  be- 
fore they  reach  their  ultimate  destination,  and  are  paid  by  the 
drawee.  It  has  been  contended  that  these  substitutes  for  cur- 
rency, and  in  one  respect  performing  its  office,  must  be  consid- 
ered as  forming  part  of  it ;  and  this  assertion  has  been  carried 
so  far,  as  to  insist  that  there  was  in  England  a  circulation  of  one 
hundred  and  fifty  millions  of  dollars  in  bills  of  exchange,  which 
was  of  the  same  character.  As  this  view  of  the  subject  would 
materially  affect  the  result  of  any  inquiry  respecting  currency, 
the  question  must  be  examined,  and  extended  to  private  notes 
and  to  bank  deposits. 

It  is  difficult  to  distinguish  a  note  on  demand  drawn  by  a  pri- 
vate individual  from  a  bank  note,  in  countries  where  every  in- 
dividual is  left  at  liberty  to  throw  such  notes  in  circulation  as 
part  of  the  currency.  The  discrimination  has  always  been  made 
on  the  Continent  of  Europe,  where  it  is  not  believed  that  any 
paper  of  that  description  has  ever  been  permitted  to  be  issued 
by  any  person  or  company  not  specially  authorized  to  that  effect. 
We  are  not  aware  that  any  similar  general  restriction  exists  in 
Great  Britain,  or  that  others  are  to  be  found  there,  than  the 
clause,  in  favor  of  the  Bank  of  England,  which  forbids  banking 
associations  to  consist  of  more  than  a  limited  number  of  part- 
ners, and  the  late  laws  forbidding,  except  in  Scotland,  the  issue 
of  notes  under  five  pounds.  The  same  liberty  seems  to  have 
originally  existed  in  the  United  States,  but  has  subsequently  been 
restrained  by  their  several  laws  to  incorporated  banks.  A  soli- 
tary exception  is  to  be  found  in  Mr.  Stephen  Girard's  Bank, 
which  was  previously  established,  and  which,  from  his  great 
wealth,  skilful  caution,  and  personal  character,  is  justly  entitled 
to  as  much  credit  as  any  chartered  bank  in  the  United  States. 
Congress  has  not,  however,  passed  any  law  preventing  the  issue 
of  notes  by  the  corporation  of  the  city  of  Washington,  and  there 
is  still  a  small  amount  of  paper  in  circulation,  issued  by  the  state 
of  North  Carolina.  In  every  other  respect,  the  currency  of  the 
United  States,  so  far  as  it  consists  of  notes,  is  strictly  confined  to 
bank  notes  issued  by  chartered  companies. 

A  bill  of  exchange,  drawn  by  an  individual  or  individuals, 
who  do  not  issue  notes  having  the  character  of  currency,  ap- 
pears to  us  to  be  clearly  distinguishable  from  a  bank  note,  though 
it  is  a  substitute,  and  lessens  the  amount  of  currency  which 


BAIVKS  AND  CURIIENCY.  29 

would  otherwise  be  required.  A  payment  made  in  bank  notes 
is  a  discharge  of  the  debt,  the  creditor  having  no  further  re- 
course against  the  person  from  whom  he  has  received  the  notes, 
unless  the  bank  had  previously  failed.  The  bill  of  exchange 
does  not  discharge  the  debt,  the  person  who  receives  it  having 
his  recourse  against  the  drawer  and  every  preceding  indorser, 
in  case  the  drawee  should  fail  or  refuse  to  pay.  But  the  essen- 
tial distinction  is,  that  the  bills  of  exchange  are  only  a  promise 
to  pay  in  currency,  and  that  the  failure  of  the  drawers,  drawees, 
and  indorsers  does  not,  in  the  slightest  degree,  affect  the  value 
of  the  currency  itself,  or  impair  that  permanent  standard  of 
value  by  which  the  performance  of  all  contracts  is  regulated. 
The  case  is,  however,  quite  dilferent,  when  the  bills  are  drawn 
by  a  bank  authorized  to  issue  bank  notes  which  make  part  of 
the  currency.  We  perceive  no  dilFercnce  between  such  drafts, 
particularly  when  paid  at  sight,  and  cither  post  notes  or  ordinary 
notes.  Five  dollar  drafts,  drawn  by  the  branches  of  the  Bank 
of  the  United  States  on  the  bank,  circulate  at  this  moment  in 
common  with  the  usual  five  dollar  notes.  Similar  drafts,  varying 
in  amount  to  suit  the  convenience  of  purchasers,  are  daily 
drawn  by  the  bank  on  its  offices,  and  by  those  offices  on  each 
other,  or  on  the  bank.  Many  of  those  drafts  pass  through  sev- 
eral hands,  and  circulate  several  months,  in  distant  parts  of  the 
country,  before  they  are  presented  for  payment.  The  holders 
of  those  bills  have  the  same  recourse  against  the  bank,  as  the 
holders  of  bank  notes.  Those, bills  are  of  the  same  character, 
depend  on  the  same  security,  and  in  case  of  failure  would  share 
the  same  fate  with  bank  notes.  Though  not  usually  included 
in  the  amount  of  the  circulation  of  the  bank,  we  cannot  but 
consider  the  average  amount  in  actual  circulation,  as  making 
part  of  the  currency  of  the  country.  A  question  somewhat  more 
difficult  arises  with  respect  to  credits  in  account  current  on  the 
books  of  the  banks,  commonly  designated  in  the  United  States 
by  the  name  of  "  deposits,"  and  which  may  perhaps  be  more 
easily  solved  by  reducing  it  to  its  most  simple  form,  that  is  to 
say,  by  first  considering  banks  purely  of  deposit. 

That  of  Hamburg,  which  still  exists,  is  the  most  perfect  of 
the  kind.  It  neither  issues  bank  notes,  nor  discounts  notes  or 
bills  of  exchange,  but  only  receives  silver  in  bars  on  deposit 
For  every  bar  containing  a  certain  weight,  called  "  marc  of 
Cologn,"  (equivalent  to  3,008  grains  troy  weight,)  of  silver  of  a 
certain  standard,*  the  bank  gives  a  credit  on  its  books  of  44"2 
lubs  B'^"-  (27  marcs  10  lubs  B*^"  )  money  of  account  Any  person 
having  a  credit  on  the  books  of  the  bank,  may  be  paid  in  simi- 
lar bars  at  the  rate  of  444  lubs  B"^"  for  a  marc  weight  of  Co- 

•  Containing,  according  to  nuwt  authorities,  forty-sflven  parte  puro  siJvpr,  and  on« 
port  of  alloy. 


30  BANKS  AND  CURRENCY. 

logn  of  silver  of  the  same  standard.  The  difference,  which  is 
less  than  one-half  per  cent,  defrays  the  expenses  of  the  estab- 
lishment. All  the  large  payments  are  effected  in  Hamburg 
by  checks  on  the  bank,  and  by  a  corresponding  transfer  of  the 
credit  on  its  books  from  one  individual  to  another.  The  utility 
of  the  establishment  consists  not  only  in  the  greater  convenience 
and  rapidity  with  which  the  payments  are  effected,  but  also  in 
having  substituted  silver  of  an  uniform  standard,  to  a  currency 
which  consisted  of  German  coins,  varying  in  standard,  weight, 
and  denomination.  The  aggregate  amount  of  credits  on  the 
books  of  the  bank,  being  at  all  times  precisely  equal,  at  the  rate 
above  mentioned,  to  the  quantity  of  silver  in  its  vaults,  it  would 
be  incomprehensible,  and,  indeed,  absurd,  to  suppose,  that  such 
large  capital,  having  an  intrinsic  value,  should  voluntarily  be 
buried  in  the  vaults,  unless  its  representative,  or  the  credits  on 
the  books  of  the  bank,  performed  every  office  of  currency.  It 
is  undeniable  that  this  is  the  fact  in  every  respect,  every  pay- 
ment being  effected  by  transfers  of  those  credits,  and  their  con- 
vertibility at  any  time  into  a  determined  weight  of  pure  silver, 
affording  the  best  possible  standard  of  value.  This  indeed  regu- 
lates exclusively  the  value  of  all  the  coins,  whether  in  circula- 
tion for  small  payments,  or  brought  to  market  as  bullion. 

Let  it  be  supposed  now,  that  it  had  been  found  from  long  ex- 
perience, that  the  quantity  of  silver  in  the  vaults,  through  all 
its  fluctuations,  had  never  been  less  than  a  certain  sum,  equiva- 
lent, for  instance,  to  two  millions  of  dollars.  The  directors  of 
the  establishment  might  conclude  that  this  amount  would,  under 
no  circumstances  whatever,  be  withdrawn,  or  in  other  words, 
that  this  sum  was  the  minimum  of  the  currency  wanted  to  effect 
the  payments  made  in  bank.  They  might  therefore  think  them- 
selves justifiable,  in  withdrawing  that  dormant  capital  from  the 
vaults,  and  converting  it  into  an  active  capital,  by  lending  it  to 
individuals.  In  this  case,  the  amount  of  credits  on  the  books  of 
the  bank  would  remain  the  same,  as  if  that  sum  in  silver  had 
not  been  withdrawn  from  its  vaults ;  and  all  the  payments  ef- 
fected by  the  transfers  of  those  credits  would  continue  to  be 
made  precisely  as  theretofore.  The  amount  of  those  credits 
would  therefore  continue  to  be,  in  every  respect,  the  currency 
of  Hamburg,  differing  from  what  it  was  formerly,  only  in  being 
sustained  by  a  less  amount  in  specie,  and  in  depending,  for  its 
ultimate  security,  on  the  solidity  of  those  to  whom  the  silver 
withdrawn  from  the  vaults  had  been  loaned. 

What  we  have  stated  as  a  supposititious  case,  actually  took 
place  in  the  Bank  of  Amsterdam,  constituted  on  nearly  the  same 
principles  as  that  of  Hamburg ;  and  from  which  the  directors 
secretly  withdrew  more  than  four  millions  of  dollars,  which  they 
lent  principally  to  the  Province  of  Holland  and  to  the  City  of 
Amsterdam.     And  it  is,  as  is  well  known,  what  is  always  done 


BANKS  AND  CURRENCY.  31 

openly  and  in  perfect  good  faith  by  all  our  banks,  as  well  as  by 
the  Bank  of  England  and  by  that  of  France.  The  credits  in 
account  current  or  "  deposits"  of  our  banks  are  also,  in  their 
origin  and  effect,  perfectly  assimilated  to  bank  notes.  Any  per- 
son depositing  money  in  the  bank,  or  having  any  demand  what- 
ever upon  it,  may  at  his  option  be  paid  in  notes,  or  have  the 
amount  entered  to  his  credit  on  the  books  of  the  bank.  The 
bank  notes  and  the  deposits  rest  precisely  on  the  same  basis ; 
for  immediate  payment  on  the  amount  of  specie  in  the  vaults ; 
for  ultimate  security  on  the  solidity  of  the  debtors  of  the  bank. 
In  case  of  a  run  upon  a  bank,  or  of  its  failure,  the  security  of 
the  holders  of  notes  is  lessened  in  proportion  to  the  amount  of 
deposits  due  by  the  bank.  We  can  in  no  respect  whatever  per- 
ceive the  slightest  difFerence  between  the  two :  and  we  cannot 
therefore  but  consider  the  aggregate  amount  of  credits  payable 
on  demand,  standing  on  the  books  of  the  several  banks,  as  being 
part  of  the  currency  of  the  United  States.  This,  it  appears  to 
us,  embraces  not  only  bank  notes,  but  all  demands  upon  banks 
payable  at  sight,  and  including  their  drafts  and  acceptances, 
out  in  order  that  such  deposits,  bills  of  exchange,  or  other  paper 
founded  on  credit,  should  make  part  of  the  currency,  it  seems 
necessary,  that  they  should  constitute  a  demand  upon  banks 
that  do  issue  currency,  or  that,  as  at  Hamburg,  a  transfer  of 
credit  on  the  books  of  the  bank  should  be  a  legal  tender.  If,  in 
comparing  the  amount  of  currency  in  different  countries,  we 
have  only  included  specie  and  actual  issues  of  paper,  it  was 
partly  in  conformity  with  received  usage,  and  partly  from  want 
of  information  respecting  the  amount,  in  other  countries,  of  the 
bank  credits,  which  may  be  considered  as  perfectly  similar  to 
our  deposits. 

Credit  is  essential  to  commerce:  but  whenever  it  receives  a 
shock,  a  commercial  revulsion  and  distress  must  necessarily 
ensue.  This  will  always  affect  the  currency  to  a  certain  ex- 
tent, since  there  must  be  a  greater  demand  for  it,  in  propor- 
tion as  the  resources  arising  from  credit  are  impaired.  But 
where,  as  in  the  United  States,  the  currency  itself  rests  on 
credit,  and  the  same  institutions  which  issue  that  currency  are 
those  from  which  accommodations  are  expected,  want  of 
credit  is  most  liable  to  be  mistaken  for  a  want  of  currency. 

Although  the  causes  of  such  distress,  and  of  a  real  or  pre- 
sumed scarcity  of  currency,  arc  of  the  same  nature,  they  may, 
as  somewhat  dissimilar  in  their  immediate  effects,  be  distin- 
guished as  external  or  internal.  As  the  imports  and  exports 
of  a  country  are  now  but  rarely  effected  by  the  same  persons, 
there  are  always,  in  consequence  of  the  commercial  intercourse 
between  two  countries,  creditors  and  debtors  on  both  sides- 
It  is  obviously  the  interest  of  both  to  exchange  or  sell  those 
debts,  when  the  exporter  does  not  want  to  import,  nor  the  im- 


82  BANKS  AAD  CURRENCY. 

porter  to  export  merchandise.  A  bill  of  exchange,  drawn  from 
the  United  States  on  England,  is  an  obligation  on  the  part  of 
the  drawer  to  exchange,  for  a  sum  paid  to  him  in  the  United 
States,  an  equivalent  in  England.  When  the  credits  and  debits 
respectively  payable  at  the  same  time  are  nearly  equal, 
the  exchange  is  made  on  equal  terms.  In  proportion  as  the 
debt  of  the  United  States  to  England  is  greater  than  that  of 
England  to  the  United  States,  the  demand  for  bills  on  England 
will  become  greater  than  the  supply ;  and  the  drawer  will  ob- 
tain a  greater  sum  in  the  United  States,  than  that  which  by 
his  bill  he  obliges  himself  to  pay  in  England.  Whenever  the 
difference  becomes  so  great,  as  to  exceed  the  expense  and  risk 
of  transporting  precious  metals  to  England,  those  metals  will 
be  exported  in  preference  to  a  remittance  in  bills.  When  the 
commercial  transactions  between  two  countries  are  compara- 
tively small,  and  the  stock  of  gold  and  silver  large,  their  ex- 
portation, particularly  in  neighboring  countries,  soon  pays  the 
balance  and  restores  the  equilibrium.  When,  as  between  the 
United  States  and  England,  the  respective  imports  and  exports 
are  very  large,  the  balance  due  may  be  increased  in  propor- 
tion ;  and  as  the  stock  of  the  precious  metals  in  the  United 
States  is  comparatively  small,  the  exchange  may  remain  for 
years  unfavorable,  and  the  precious  metals  continue  to  be  ex- 
ported, until  the  balance  is  actually  paid  from  the  proceeds 
of  the  exports  generally,  or  converted,  by  the  sale  of  American 
stock,  into  a  debt  not  immediately  demandable.  This  appa- 
rently continued  drain  was  considered,  in  former  times,  as  an 
evil  of  great  magnitude ;  and  severe  laws  were,  in  most  coun- 
tries, enacted  against  the  exportation  of  specie.  Experience 
has  shown,  not  only  that  those  laws  were  inefficient,  but  also 
that  the  best,  if  not  only  means,  to  insure  a  uniform  and  suffi- 
cient supply  of  any  foreign  product,  when  there  is  no  other 
object  in  view,  is  to  lay  no  restraint  whatever  on  its  importa- 
tion and  exportation.  Commerce,  when  not  interrupted  by  war, 
or  other  causes,  is  always  found  to  supply  the  amount  of  pre- 
cious metals  which  may  bo  wanted.  Numerous  striking  proofs 
might  be  adduced :  it  is  sufficient  to  recollect,  that  the  average 
rate  of  exchange  on  England,  from  the  beginning  of  1821  to  the 
end  of  1829,  has  been  $4  87  cents  per  pound  sterling,  (about 
Qj  per  cent,  premium  on  nominal  par,)  or  2|  per  cent,  above 
the  true  par;  that  it  never  was,  during  the  whole  of  that 
time,  below  $4:  60,  at  which  rate,  gold  being  underrated  by  our 
mint  regulations,  commences  to  be  exported,  and  that  that  pe- 
riod was  in  no  degree  remarkable  for  scarcity  of  specie. 

Being  obliged  to  refer  to  the  rate  of  exchange,  it  must  be  re- 
collected, that  what  is  universally  meant  by  par,  is  the  promise 
to  pay,  in  another  place,  a  quantity  of  pure  silver  or  gold,  equal 
in  weight  to  the  quantity  of  pure  silver  or  gold  contained  in 


BANKS  AND  CUIlRENCy  33 

the  coins,  with  which  the  drawer  of  the  bill  of  exchange  is  paid. 
When  bills  are  drawn  at  long  dates,  and  payable  at  a  distant 
place,  the  time  which  elapses  between  the  purchase  of  the  bill 
from  the  drawer,  and  its  payment  by  the  drawee,  must  be  taken 
into  consideration,  in  order  to  calculate  what  would  be  an  equal 
exchange,  as  distinguished  from  the  par  of  exchange.  There  is 
no  other  difficulty,  but  that  of  ascertaining  their  respective 
weights,  in  order  to  calculate  the  par  of  exchange  between  coun- 
tries having  the  same  standard  of  value,  or  in  which  payments 
are  usually  made  with  the  same  metal.  This  being  the  case  in 
the  United  States  and  in  France,  and  the  French  kilogramme 
being  equivalent  to  about  1.5,435  grains,  troy  weight,  the  par 
of  exchange  of  the  United  States  on  France,  is  at  the  rate  of 
about  5  francs  and  34^  centimes  for  a  dollar,  since  the  French 
franc  contains  4^  grammes,  and  the  United  States'  dollar  37 In- 
grains of  pure  silver.  Allowing  1^  per  cent,  on  account  of  the 
90  days  which  will  usually  elapse  between  the  day  on  which 
the  value  of  a  bill  payable  60  days  after  sight  is,  in  our  country, 
paid  to  the  drawer,  and  the  day  on  which  that  bill  is  paid  in  the 
other  country  by  the  drawee,  it  will  be  found  that  the  equal  ex- 
change between  the  United  States  and  France  is,  on  such  bills, 
at  the  rate  of  francs  5,41  if  drawn  from  the  United  States  on 
France,  and  at  the  rate  of  francs  5,28  for  one  dollar,  if  drawn 
from  France  on  the  United  States. 

But  if  one  of  the  two  metals  is,  by  mint  regulations,  under- 
rated or  excluded  in  one  country,  whilst  the  other  metal  is  in 
the  same  manner  excluded  in  another  country,  the  usual  pay- 
ments will  be  made  in  different  metals  in  those  two  countries ; 
and  the  par  of  exchange  between  them  must,  then,  as  is  the  case 
between  the  United  States  and  England,  depend  on  the  relative 
value  of  gold  and  silver  at  the  time,  and  vary  with  every  fluc- 
tuation of  that  relative  value.  These  fluctuations  are,  however, 
confined  within  narrow  limits;  and  the  medium  par  of  exchange 
between  the  United  States  and  England,  deduced  from  the  aver- 
age premium  on  gold  over  silver  coins  in  France,  is  about  S4  75, 
for  one  pound  sterling,  or  near  7  per  cent,  above  the  nominal 
par  assumed  in  the  usual  quotations  of  exchange.  It  is  in  those 
quotations  supposed,  that  one  pound  sterling  is  equal  to  84  44  4-9, 
or,  in  other  words,  that  one  dollar  is  equal  to  4.f.  Gd.  sterling.  It  is 
not  necessary  to  investigate,  whether  this  presumed  equality  or 
par  was  derived  from  the  intrinsic  value  of  some  ancient  Span- 
ish dollar,  no  longer  current,  or  whether  it  was  adopted  as  con- 
venient for  the  conversion  of  most  of  the  currencies  of  the  Brit- 
ish colonies  into  British  currency.  It  is  certain  that  this  imagin- 
ary par  does  not  even  correspond  with  that  which,  though 
erroneously,  might  be  deduced  from  comparing  separately  the 
gold  and  silver  coins  of  the  two  coimtrics  with  each  other  respec- 
tively ;  since  this  would  be,  if  comparing  gold  to  gold,  about 

X 


84  BATIKS  AND  CURRENCY. 

84  56,  and  if  comparing  silver  to  silver,  (at  the  former  rate  of 
62  shillings  sterling  for  one  pound  troy  weight  of  silver,  old  British 
standard.)  about  $4  63  for  a  pound  sterling.  The  dealers  in  ex- 
change are  at  no  loss  to  make  their  calculations,  whatever  rate 
may  be  assumed  as  par  in  the  usual  quotations :  but  this  puzzles, 
and,  in  various  respects,  misleads  those  who,  without  investiga- 
tion, naturally  suppose  that  what  has  been  assumed  as  such  is 
the  true  par  of  exchange. 

The  causes  of  the  fluctuations  of  exchange  between  distant 
places  in  an  extensive  country,  or  between  different  countries, 
are  of  the  same  nature,  and  may  occasion  a  similar  transporta- 
tion of  the  precious  metals  from  one  place  to  another.  We  will 
hereafter  examine  how  that  from  one  part  of  the  United  States 
to  another  has  been  affected  by  the  Bank  of  the  United  States. 
But  there  is  this  difference,  betv\'een  a  commercial  distress  and 
presumed  scarcity  of  currency,  due  to  internal  causes,  whilst 
the  foreign  exchanges  remain  favorable,  and  a  similar  distress 
arising  from  large  foreign  debts,  and  accompanied  by  an  unfa- 
vorable rate  of  exchange,  that,  in  the  last  case,  there  is  an  ex- 
portation of  the  coins  of  the  country  which  cannot  take  place 
in  the  first.  If  the  same  effects,  in  other  respects,  are  never- 
theless the  same  in  both  cases ;  if  in  both,  the  same,  and  some- 
times general  distress  equally  prevails;  if  the  same  difticulty 
occurs  in  the  payment  of  debts ;  if  the  same  complaint  is  made 
of  want  of  money,  whether  specie  is  exported  or  not,  it  is  obvi- 
ous that  there  must  be  another  cause,  besides  an  actual  scarcity 
of  currency,  for  the  real  distress  which  is  felt ;  and  that  what  is 
called  "  want  of  money,"  is  not  "  want  of  currency."  It  will  be 
found  that  this  cause  is  universally  overtrading,  and  that  the 
want  of  money,  as  it  is  called,  is  the  want  of  exchangeable  or 
saleable  property  or  commodities,  and  the  want  of  credit.  The 
man  who  says  that  he  wants  money,  could  at  all  times  obtain 
it,  if  he  had  either  credit  or  saleable  commodities. 

Overtrading  consists  in  undertakings  or  speculations  of  every 
possible  description,  which  fail  altogether,  or  of  which  the  re- 
turns are  slower  than,  under  sanguine  expectations,  had  been 
calculated,  or  the  proceeds  of  which,  (too  many,  tempted  by 
temporary  high  prices  or  profits,  having  embarked  in  the  same 
branch  of  business,)  greatly  exceed  the  demand,  and  glut  the 
market.  A  great  loss  may  be  experienced  by  those  who  have 
entered  into  any  such  undertakings  with  their  own  resources. 
But  when  resting  principally  on  credit,  and  pursued  at  the  same 
time  by  a  great  portion  of  the  dealers  or  men  of  enterprise,  a 
general  impossibility  of  fulfilling  previous  engagements  takes 
place,  which  affects  even  those  who  are  ultimately  solvent. 
When  that  mutual  confidence,  which  is  the  sole  foundation  of 
credit,  is  once  shaken,  the  capitals  that  are  usually  loaned  can 
no  longer  be  obtained,  the  usual  amount  of  bills  of  exchange, 


BANKS  AND  CURRENCY.  35 

discounted  notes,  or  other  commercial  papers  founded  on  credit, 
is  lessened,  and  specie  or  currency  itself  becomes  comparatively 
scarce,  partly  because  some  is  hoarded,  principally  because  a 
portion  of  its  substitutes  is  withdrawn  from  circulation.  Yet 
specie,  under  those  circumstances,  acts  but  a  subordinate  part, 
its  scarcity  being  the  etiect,  and  not  the  cause,  of  the  evil,  and 
the  remedy  to  this  consisting  in  restoring  credit  and  confidence, 
which  will  always  procure  a  sufficient  amount  of  currency,  and 
not  in  an  attempt  to  increase  the  quantity  of  currency,  which 
can  produce  no  substantial  benefit  until  confidence  is  restored. 
When  it  consists  of  paper  founded  on  credit,  any  increase  is 
inefficient  for  remedying  the  evil,  unless  it  be  issued  by  an  insti- 
tution, the  credit  of  which  has,  in  the  general  wreck,  remained 
unaflTected  and  unimpaired. 

The  commencement  of  the  year  1793,  was,  in  England,  a 
season  of  great  and  universal  commercial  distress.  It  had,  as 
usual,  been  preceded  by  a  period  of  great  apparent  prosperity, 
which  had  stimulated  overtrading ;  and  this  had  been  followed 
by  its  unavoidable  consequences.  More  than  one  hundred  coun- 
try banks  failed,  or  suspended  their  payments ;  the  distress  was 
general,  the  credit  of  solvent  houses  was  affected,  the  usual  ac- 
commodations, which  enabled  them  to  have  their  bills  discount- 
ed, and  to  meet  the  demands  against  them,  were  withdrawn, 
and  the  complaint  of  uant  of  money  was  universal.  Under 
those  circumstances,  government  interfered,  and  loaned,  or  of- 
fered to  loan,  to  solvent  dealers,  five  millions  sterling  in  exche- 
quer bills.  The  remedy  was  effectual ;  the  whole  amount  offered 
to  be  loaned  was  not  even  applied  for ;  and,  in  a  very  short 
time,  confidence  was  restored,  and  every  one  who  was  not  ac- 
tually insolvent  w^as  able  to  meet  his  engagements.  But  exche- 
quer bills  are  not  currency,  but  only  a  promise  to  pay  currency 
at  the  end  of  one  year.  Government  did  not  lend  currency,  or 
add  a  single  shilling  to  its  amount.  The  credit  of  individuals 
had  received  a  severe  and  general  shock,  and  that  of  govern- 
ment, which  was  unimpaired,  ^vtls  substituted  for  private  credit. 
Those  who  had  capital  to  lend,  and  would  not  advance  it  on  pri- 
vate security,  or  who,  in  other  words,  would  not  discount  the 
bills  of  individuaJs,  lent  that  capital,  or  the  currency  which  was 
wanted,  on  public  security,  or,  in  other  words,  discounted  the 
exchequer  bills,  that  is  to  say,  the  bills  of  government.  The 
distress,  the  pretended  want  of  money,  was  relieved,  not  by  any 
additional  issues  of  currency,  the  amount  of  which  must  there- 
fore have  been  sufficient,  but  by  restoring  private  confidence 
and  private  credit. 

It  is  also  evident,  that  what  was  then  effected  by  government, 
might  have  been  done  by  the  Bank  of  England,  had  that  insti- 
tution, more  sparing  of  its  resources,  during  the  preceding  pe- 
riod of  prosperity  and  incautious  enterprise,  been  enabled,  when 


9a  BANKS  AND  CURRENCY 

the  revulsion  took  place,  to  lend  its  credit  to  solvent  houses,  by 
discounting  their  bills,  and  increasing  its  issues  of  paper  curren- 
cy. It  may  be  presumed,  that,  having  already  overstrained  its 
resources,  the  bank  could  not  have  done  this,  without  endan- 
gering its  own  credit,  and  running  the  risk  of  being  unable  to 
pay  its  own  notes,  if  their  amount  was  increased.  But  the  mode 
adopted  by  government,  and  which  proved  so  efficacious,  makes 
it  obvious,  that,  had  the  bank  been  enabled,  without  the  aid  of 
the  treasury,  to  relieve  the  distress,  and,  what  was  called  the 
want  of  money,  the  relief  afforded  would  have  been  the  result, 
much  less,  if  at  all,  of  the  enlarged  issues  of  bank  notes,  than  of 
the  bank  lending  its  credit  to  those  solvent  dealers  whose  credit 
was  impaired. 

As  a  bank  cannot  increase  its  discounts  without  increasing  its 
circulation,  the  two  operations,  being  in  its  hands  inseparable, 
are  generally  confounded.  The  manner  in  which  the  British 
government  afforded  relief  in  the  year  1793,  conclusively  proves 
that  they  are  essentially  distinct,  even  in  a  country  where  the 
currency  consists  principally  of  paper  founded  on  credit,  and 
that  the  demand  always  made  on  banks  in  times  of  pressure,  for 
enlarged  issues  of  bank  notes,  is  not  a  demand  for  currency  but 
for  credit.  Cautious  and  well-directed  banks  will  always  afford 
great  relief  in  such  times,  if  enabled  by  the  previous  prudent 
administration  of  their  affairs  to  lend  their  credit  to  solvent  deal- 
ers ;  which  cannot  be  done  without  enlarging  their  issues.  If, 
on  the  contrary,  this  has  already  been  done  to  its  utmost  extent, 
if  during  a  period  of  high  prices  and  great  apparent  prosperity, 
the  spirit  of  enterprise,  naturally  excited  by  that  state  of  things, 
and  which  required  then  to  be  checked,  has,  on  the  contrary, 
been  stimulated  by  incautious  loans  and  consequent  issues  of 
paper  on  the  part  of  the  banks,  the  result  will  be,  and  has  every- 
where always  been,  as  fatal  as  unavoidable.  When  the  revul- 
sion takes  place,  when,  from  excessive  competition  or  imprudent 
speculation,  the  market  becomes  glutted  with  a  superabundance 
of  any  species  of  commodit}'-,  often  in  the  United  States  of  land 
itself,  or  when,  from  want  of  skill  or  any  other  cause,  undertak- 
ings have  altogether  failed,  or  when  the  slow  returns  of  such 
undertakings  require  years  to  be  reahzed,  and  both  capital  and 
credit  are  exhausted ;  at  the  very  time  when  the  aid  of  banks 
would  be  most  wanted,  those  institutions,  prematurely  disabled, 
instead  of  simultaneously  enlarging  their  issues,  and  lending 
their  credit  to  solvent  but  embarrassed  dealers,  manufacturers, 
and  farmers,  are  compelled  in  self  defence  to  contract  their 
issues  and  loans,  and  thus  greatly  to  aggravate  the  evil,  which 
they  had  at  least  neglected  to  check,  if  they  were  not  instru- 
mental in  its  growth. 

In  countries,  therefore,  the  currency  of  which  consists  princi- 
pally of  bank  paper,  banks  will  have  a  beneficial  or  pernicious 


BA^rivS  AND  CURRENCY.  37 

influence  on  credit,  and  on  a  currency  depending  on  credit,  ac- 
cording to  tiie  manner  in  which  they  may  be  a(hninistercd ;  use- 
ful when  their  operations,  in  prosperous  times  and  whilst  under 
their  control,  are  regulated  by  probity,  great  discretion  and 
skill,  pernicious  when  their  adrnhiistration  is  defective  in  any  of 
those  respects.  But  in  countries,  where  the  currency  consists 
wholly  or  principally  of  the  precious  metals,  and  where  hankers 
lend  money  or  discount  bills,  but  do  not  issue  a  paper  currency, 
the  two  operations  are  never  confounded;  and  although  not  ex- 
empt from  commercial  revulsions,  these  will  be  of  less  common 
occurrence,  and  have  little  or  no  influence  on  currency  itself* 
It  may  be  confidently  aflirmed,  that  the  precious  metals,  under 
any  circumstances  whatever,  and  amidst  all  the  temporary 
fluctuations  arising  from  a  disproportion  between  supply  and 
demand,  continue  to  be  a  more  permanent  standard  of  value 
than  any  other  commodity,  or  any  species  of  paper  riCsting  on 
an  element  so  variable  as  credit. 

We  cannot  conceal  from  ourselves,  that  specie-paying  banks 
are  not  only  exposed  to  extraordinary  drains  from  abroad,  but 
are  also  occasionally  controlled  by  moral  causes,  the  effects  of 
v/hich  cannot  be  calculated,  nor  without  great  skill  and  discre- 
tion be  always  prevented.  These  never  afiect  a  metallic  cur- 
rency, which  has  an  intrinsic  value,  varying  less  than  that  of 
any  other  comm.odity,  and  not  at  all  depending,  as  paper,  on 
confidence,  fear,  conjectures,  or  any  of  the  fluctuations  of  pub- 
lic opinion.  It  is  tMpially  clear,  that  extraordinary  drains  of 
specie,  occasionally  inconvenient  when  the  currency  is  purely 
or  principally  metallic,  may  be  fatal  to  one  which  consists  of 
bank  notes  convertible  at  will  into  specie.  Supposing  the  cur- 
rency of  a  country  to  consist  of  one  hundred  millions,  a  drain  of 
twenty  millions  from  abroad  would  produce  great  inconvenience, 
but  nut  beyond  that  of  contracting  the  metallic  currency  to 
that  extent,  until  commerce  had  supplied  the  deficiency.  But, 
if  consisting  of  bank  notes,  sustained  by  twenty  millions  of  specie 
in  the  vaults  of  the  banks,  the  basis  being  withdrawn,  the  whole 
fabric  is  at  once  overthrown,  and  specie  payments  must  be  sus- 
pended. 

One  of  the  most  fatal  efTects  of  that  suspension  is  the  great 
and  unavoidable  distress,  which  attends  a  return  to  a  specie 
currency,  particularly  when  the  suspension  h^is  been  of  long 
continuance.  Whilst  this  lasts,  the  loss  falls  on  the  creditors : 
but  new  contracts  are  daily  made,  founded  on  the  existing  state 
of  the  currency ;  and  should  the  suspension  continue  twenty 
years,  as  was  the  case  in  England,  as  almost  all  the  contracts  in 
force,  and  not  yet  executed,  at  the  time  when  specie  payments 

•  Soo  hornnnpr  Mr.  Baring's  evidence,  and  Mr.  Tooke,  respecting  the  eflcct  of  a 
metallic  currency,  m  France. 


38  BAitKS  AND  CURRENCY. 

are  resumed,  must  have  been  made  when  the  currency  waa 
depreciated,  the  obligation  to  discharge  them  in  specie  is  con- 
trary to  equity,  falls  on  the  debtors,  who  are  always  the  part 
of  the  community  less  able  to  bear  the  burthen,  and  proves 
more  calamitous  than  the  suspension  had  been.  Short  in  dura- 
tion as  this  had  been  in  the  United  States,  the  effect  was  sensi- 
bly felt :  and  to  this  cause,  which  also  occasioned  the  failure  of 
a  number  of  new  banks,  must  in  a  great  degree  be  ascribed  the 
general  distress  of  the  years  1818 — 1819.  The  relief  laws  of 
some  of  the  States,  and  in  England  the  corn  laws,  may  be  traced 
to  the  same  source.  In  that  country,  after  so  long  a  suspension 
of  specie  payments,  the  calamity  has  necessarily  been  far  more 
extensive  and  lasting.  It  is  yet  felt,  and  may  still  seek  for 
remedies  worse  than  the  evil,  and  call  for  small  notes,  excessive 
issues,  and  all  those  measures  which  would  necessarily  lead 
again  to  an  inconvertible  paper  money. 

Considerations  of  this  nature  may  well  have  suggested  to  the 
committee  of  the  House  of  Representatives,  the  question,  whether 
a  metallic  currency  would  not,  in  the  United  States,  have  been 
preferable  to  one  consisting  of  bank  notes.  We  would  incline 
to  the  affirmative,  if  the  system  was  not  already  established, 
and  if  we  believed,  that  an  attempt  to  return  to  a  pure  metallic 
currency,  which  could  not,  without  producing  great  evils,  be 
carried  suddenly  into  effect,  was  at  all  practicable.  Were  not 
this  the  case,  we  would  think,  that  a  system  of  commercial  credit, 
founded  on  deposits,  bills  of  exchange,  and  other  negotiable 
paper,  such  as  is  carried  on  by  the  bankers  of  London,  and  by 
all  the  bankers  of  the  Continent  of  Europe,  neither  of  whom 
issues  any  notes  in  the  shape  of  currency,  would  afford  to  com- 
merce, at  least  in  commercial  cities,  nearly,  if  not  altogether, 
the  same  accommodations  and  advantages  which  are  found  in 
the  present  system.  Commercial  revulsions,  and  numerous  fail- 
ures amongst  dealers,  as  they  may  occur  wherever  there  has 
been  excessive  overtrading,  though  less  frequent,  do  neverthe- 
less occasionally  take  place  in  countries  which  have  only  a  me- 
tallic currency.  But  their  effect  is  generally  confined  to  the 
dealers,  extending  but  indirectly  and  feebly  to  the  community, 
and  never  afFecting  the  currency,  the  standard  of  value,  or  the 
contracts  between  persons  not  concerned  in  the  failures.  It 
must  be  allowed  at  the  same  time,  that,  in  the  country,  where 
the  system  of  deposits  cannot  exist  to  the  same  extent  as  in  cities, 
banks  soberly  and  skilfully  administered,  stimulate  industry  by 
the  facility  which  their  loans  afford  to  men  of  enterprise,  and 
that  the  ability  of  those  banks  to  make  those  advances,  would 
be  much  curtailed,  if  altogsther  precluded  from  issuing  notes. 

A  very  ingenious  plan  was  proposed  by  Mr.  Ricardo,  and  has 
since  been  expounded  and  defended  with  great  talent  by  Mr. 
M'CuUoch,  intended  to  afford  security  against  the  dangers  to 


BANKS  AND  CURRENCY.  89 

wliich  every  system  of  paper  currency  heretofore  devised  is 
exposed.  It  is  not  applicable  to  the  United  States,  as  it  is  founded 
on  the  exclusion  of  gold  and  silver  coins,  which,  by  our  Consti- 
tution, are  alone  a  legal  tender.  Some  plausible  objections  have 
been  made  to  it,  which,  for  that  reason,  it  is  not  necessary  to 
discuss ;  and  we  will  only  give  the  outline  of  the  plan. 

It  consists  in  the  total  exclusion  of  a  metallic  currency,  with 
the  exception  perhaps  of  the  silver  necessary  for  small  pay- 
ments, in  making  the  notes  of  the  Bank  of  England  a  legal  ten- 
der, and  in  imposing  on  that  institution  the  obligation  to  pay 
them,  on  demand,  in  gold  bars  of  the  proper  standard.  This 
last  provision  would  be  sufficient  to  prevent  any  depreciation  of 
the  notes,  whilst,  on  the  other  hand,  the  gold  bars  paid  by  the 
bank  could  not,  either  directly,  or  by  being  converted  into  coin, 
take  their  place  and  add  any  thing  to  the  amount  of  the  cur- 
rency. Any  call  on  the  bank  for  gold,  would  therefore  necessa- 
rily lessen  that  amount,  and  must  also  necessarily  cease,  when- 
ever this  was  somewhat  less  than  the  amount  in  value,  which  is 
indispensable  in  England  for  the  payments  in  currency.  For 
whenever  this  point  is  reached,  the  notes  must  be  worth  at  least 
as  much  as  their  nominal  value  in  gold  at  its  ordinary  price; 
and,  in  the  case  of  unfavorable  exchanges,  the  drain  must  alto- 
gether cease,  as  soon  as  the  currency  is  sufficiently  contracted 
to  have  raised  its  value  to  a  rate  corresponding  with  that  of  ex- 
change. The  inconvenience  of  that  contraction  would  not,  it 
seems,  be  greater  than  if  the  currency  was  purely  metallic. 
Supposing  forty  millions  sterling  to  be  the  minimum  of  the  ab- 
solutely necessary  currency  under  an  unfavorable  state  of  for- 
eign exchanges,  the  community  would  be  protected  against  the 
danger  of  any  depreciation  in  the  nominal  value  of  the  notes, 
and  the  bank,  under  any  circumstances  whatever,  against  a 
drain  that  could  compel  it  to  suspend  its  payments,  provided  the 
value  of  the  gold  bars  in  its  vaults  was  always  equal  to  the  ex- 
cess of  its  issues  over  forty  millions.  The  plan  was  carried  into 
efTect,  during  a  short  period,  by  the  Bank  of  England,  and  then 
discontinued,  for  reasons  which  have  not  been  explained,  and 
which  it  would  be  interesting  to  understand- 


It  is  well  known  that  the  Bank  of  England,  three  banks  in 
Scotland,  and  the  Bank  of  Ireland,  are  the  only  chartered  bank- 
ing institutions  in  the  United  Kingdom.  The  capital  of  the  Bank 
of  England,  amounting  now  to  fourteen  millions  pounds  sterling, 
has  been  loaned  altogether  to  government,  at  an  interest  of  3 
per  cent,  and  is  not  to  be  reimbursed  till  the  expiration  of  the 
charter.  All  the  other  banks  of  England,  commonly  called 
country  banks,  consist  of  private  copartnerships,  without  any 
determined  capital,  and  the  members  of  which  are  liable  to  the 


40  BAKKS  AND  CURRENCY. 

same  responsibilities  as  any  other  commercial  houses.  With  the 
exception  of  Mr.  Girard's  Bank,  ail  the  banks  established  in  the 
United  States  arc  joint  stock  companies  incorporated  by  law, 
with  a  fixed  capital,  to  the  extent  of  which  only  the  stockliold- 
ers  are  generally  responsible.*  The  business  of  all  those  banks 
consists,  in  receiving  money  on  deposit,  in  issuing  bank  notes, 
and  in  discounting  notes  of  hand  or  bills  of  exchange.  A  por- 
tion of  the  capital  is  sometimes  vested  in  public  stocks;  but 
this  is  not  obligatory ;  and  in  this  they  difler  essentially  from 
the  Bank  of  England.  The  capital  of  this  institution,  being 
loaned  to  government,  and  not  depending  on  the  solidity  of  the 
paper  discounted,  affords  a  stable  guarantee  to  the  holders  of 
notes  and  to  the  depositors.  The  bank  can  loan  to  individuals, 
or  advance  to  government  (beyond  its  capital  as  above  mention- 
ed) nothing  but  the  difference,  between  the  aggregate  of  its 
notes  in  circulation,  and  of  the  credits  in  account  current  on  its 
books,  and  the  amount  of  specie  in  its  vaults.  But  the  Ameri- 
can banks  lend  to  individuals,  not  only  that  difference,  but  also 
the  whole  amount  of  their  capital,  with  the  exception  only  of 
such  portion,  as  tbey  may  find  it  convenient,  but  are  not  obliged 
to  vest  in  public  stocks.  It  follows  that  the  security  of  the 
holders  of  notes,  and  of  the  depositors  generally,  rests  exclu- 
sively on  the  solidity  of  the  paper  they  have  discounted.  It 
might  seem,  on  the  other  hand,  that,  as  the  Bank  of  England 
cannot  apply  its  original  capital  to  any  immediate  use,  whilst 
the  American  banks  may,  by  curtailing  their  discounts,  call  in 
their  capital  on  any  emergency,  they  might,  without  risk,  put 
in  circulation  a  greater  proportionate  amount  of  notes.  But 
such  curtailment  can  never  be  made  to  any  considerable  extent, 
without  causing  much  distress;  and,  in  point  of  fact,  a  large 
portion  of  their  loans  consists  of  what  the  merchants  consider 
as  permanent  accommodation,  and,  in  the  country,  often  rests 
on  real  security.  This  departure  from  what  has  been  generally 
deemed  the  true  banking  principle,  must,  it  is  believed,  be  as- 
cribed to  the  original  disposition  of  the  capital. 

Whenever  therefore  an  American  bank  is  in  full  operation, 
its  debts  generally  consist,  1st,  to  the  stockholders,  of  the  capi- 
tal ;  2d,  to  the  community,  of  the  notes  in  circulation  and  of  the 
credits  in  account  current,  commonly  called  deposits:  and  its 
credits,  1st,  of  discounted  notes  or  bills  of  exchange  and  occa- 
sionally of  public  stocks;  2d,  of  the  specie  in  its  vaults  and  of 
the  notes  of,  and  balances  due  by,  other  banks;  Sd,  of  its  real 
estate,  either  used  for  banking  purposes  or  taken  in  payment  of 
debts.  Some  other  incidental  items  may  sometimes  be  intro- 
duced ;  a  part  of  the  capital  is  occasionally  invested  in  road, 
canal,  and  bridge  stocks,  and  the  debts,  secured  on  judgments, 

*  The  stockholders  are  made  personally  responsible,  in  some  of  the  stales. 


3,338,000 


BANKS  AND  CURRENCY.  41 

or  bonds  and  mortgages,  are  generally  distinguished  in  the  offi- 
cial returns  of  the  banks.  In  order  to  give  a  clear  view  of  the 
subject,  we  annex  an  abstract  of  the  situation  of  the  thirty-one 
chartered  banks  of  Pennsylvania,  in  November,  1829. 

♦Capital, $12,032,000 

Notes  in  circulation,      $7,270,000  J  i^noonnn 

Deposits, 8,758,000  i    "     '       1^,028,000 

Surplus  funds, 1,142,000 

$29,202,000 

Bills  discounted, $17,526,000 

Public  stocks,! i 

Road,  canal,  and  bridge  stocks,     r      "     "     "    4,620,000 
Debts  secured  on  mortgages,  &.c.  ) 

Real  estate, 1,310,000 

Notes  of  other  banks,  ) 
And  due  by  other  banks,  ) 
Specie, 2,408,000 

$29,202,000 

It  will  be  easily  perceived,  1st,  that  >vhat  is  called  the  surplus, 
and  sometimes  the  reserved  or  contingent  fund,  is  nothing  more 
than  that  which  balances  the  account,  or  the  diiference  between 
the  debits  and  credits  of  the  banks ;  and  that,  in  order  to  be 
enabled  to  repay,  at  the  expiration  of  the  charter,  to  the  stock- 
holders, the  full  amount  of  their  stock,  that  fund  or  difference 
ought,  in  every  sound  bank,  to  be  sufficient  to  cover  all  the  bad 
debts,  and  all  the  losses,  which  may  be  incurred  on  the  sale  of 
the  various  stocks  held  by  it,  and  of  its  real  estate :  2dly,  that 
the  deposits  may  at  any  time  be  converted  into  bank  notes,  and 
that  both  ought,  in  correct  language,  to  be  included  under  the 
denomination  of  circulation ;  3dly,  that  the  notes  of  other 
banks  on  hand,  form  no  part  of  the  circulation,  and  ought,  when 
considering  the  banking  system  as  a  whole,  to  be  deducted  from 
the  amount  of  the  notes  in  circulation ;  and  that,  for  the  same 
reason,  inasmuch  as  the  balances  due  to  other  banks  by  the 
several  banks,  are  included  in  the  deposits,  the  balances  due  by 
such  other  banks  ought  also  to  be  deducted  from  that  item, 
which  would  reduce  the  aggregate  of  those  two  items,  in  the 
preceding  statement,  from  16,028,000  to  12,690,000  dollars: 
4thly,  that  the  capital  is  the  only  item  in  the  account  apparent- 
ly invariable,  though  it  may  occasionally  be  increased  by  legis- 
lative permission,  and  lessened  by  purchases  of  their  own  stock 

*  Dcdiicling  ao  much  of  their  own  stock  as  has  been  purchased  by  the  banks. 
Fur  want  uf  materials,  it  similar  deduction  has  nui  been  made  in  the  subvcquent 
statcmeiiis. 

t  The  jiiiblic  slnck.s  are  not  dislLnguishcd  from  others  in  the  slatenveiU  of  the 
Bank  of  Pennsylvania.     Those  held  by  the  other  banks  amount  to  $l,588j00O. 

F 


42  BANKS  AND  CURRENCY. 

by  the  banks ;  and  that  all  the  other  items  are  variable,  and  do 
vary  according  to  the  operations  of  the  banks :  5thly,  that  sup- 
posing the  second  and  third  items  of  credits  to  remain  the  same, 
the  circulation,  or  aggregate  of  deposits  and  notes  in  circula- 
tion, cannot  be  either  increased  or  decreased,  without  a  corre- 
sponding decrease  or  increase,  either  of  the  bills  discounted,  or 
of  the  specie,  or  of  both  ;  6thly,  that  by  limiting  by  law  the 
amount  of  the  debts  due  to  the  banks,  as  included  in  the  two 
first  items  of  the  credits,  to  a  sum  bearing  a  certain  ratio  to  the 
capital,  and  by  likewise  limiting,  in  a  similar  manner,  the  gross 
amount  of  the  notes  in  circulation,  both  which  limitations  are 
always  under  the  control  of  the  banks,  excessive  issues  may 
be  prevented :  7th]y,  that  if  the  situation  of  the  banks  of 
Pennsylvania  in  the  aggregate  be  taken  as  a  proper  basis  for 
those  limitations,  the  whole  amount  of  debts  due  to  a  bank 
ought  not  to  exceed  twice,  nor  the  gross  amount  of  its  notes  in 
circulation,  two-thirds  of  the  amount  of  its  capital.  But  it 
must  not  be  forgotten,  that,  although  those  limitations  would  be 
useful  in  checking  the  amount  of  loans  and  issues,  the  ultimate 
solvency  of  a  bank  always  depends  on  the  solidity  of  the  paper 
it  discounts. 

The  capital  of  the  state  banks  existing  in  the  year  1790, 
amounted  to  about  2,000,000  of  dollars.  The  former  bank 
of  the  United  States  was  chartered  in  1791,  with  a  capital  of 
10,000,000.     The  charter  was  not  renewed;  but  in  January, 

1811,  immediately  before  its  expiration,  there  were  in  the 
United  States  eighty-eight  state  banks,  with  a  capital  of 
42,610,000  dollars,  making  then,  together  with  that  of  the  na- 
tional bank,  a  banking  capital  of  near  53,000,000.     In  June, 

1812,  war  was  declared  against  England ;  and  in  August  and 
September,  1814,  all  the  banks  south  and  west  of  New-Eng- 
land suspended  their  specie  payments. 

It  has  always  been  found  difficult  to  ascertain  with  precision 
the  causes  which,  in  each  special  case,  produce  an  extraordinary 
drain  of  specie,  and  compel  a  bank  to  suspend  its  payments. 
Although  it  clearly  appears  that  very  large  and  unforeseen  ad- 
vances to  government  were  the  immediate  cause  of  the  suspen- 
sion of  the  payments  of  the  Bank  of  England  in  the  year  1797, 
it  would  seem,  at  this  distance  of  time,  to  have  been  easy  to 
prevent  that  occurrence.  The  bills  of  exchange  from  abroad  on 
government,  or  any  other  floating  debt,  for  the  payment  of  which 
the  bank  was  required  to  make  those  advances,  might  with  fa- 
cility have  been  converted  into  funded  debt.  And  when  we 
find,  that,  in  less  than  seven  months  after  the  suspension,  the 
bank  declared,  by  a  solemn  resolution,  that  it  was  enabled  to 
issue  specie,  and  coidd  with  safety  resume  its  accustomed  func- 
tions, if  the  political  circumstances  of  the  country  did  not  ren- 
der it  inexpedient,  it  is  hardly  possible  to  doubt  that  the  sus- 


BANKS  AND  CURRENCY.  43 

pension,  in  its  origin,  as  well  as  in  its  continuance,  was  a  volun- 
tary act  on  the  part  of  government.  Opinions  are  however  di- 
vided to  this  day  on  that  subject ;  and  some  distinguished  Eng- 
lish writers  ascribe  that  event  to  some  unaccountable  panic. 
There  can  be  no  doubt,  that  there  was  a  great  and  continued 
run  on  the  bank  for  specie  prior  to  the  suspension ;  and  what 
renders  the  transaction  still  more  inexplicable,  is,  that,  almost 
immediately,  and  during  some  years  after  the  suspension  had 
actually  taken  place,  the  bank  notes,  though  no  longer  converti- 
ble into  specie,  were  at  par.  The  question  is  not  free  of  diffi- 
culty as  respects  the  similar  event  in  the  United  States. 

The  following  reasons  were  assigned  by  the  directors  of  the 
chartered  banks  of  Philadelphia,  in  an  address  to  their  fellow- 
citizens,  dated  the  30th  of  August,  1813. 

"  From  the  moment  when  the  rigorous  blockade  of  tlie  ports  of  the  United 
States  prevented  the  exportation  of  ovir  produce,  foreign  supplies  could  be  paid 
for  in  specie  onl3',  and  as  the  importation  of  foreign  goods  in  tlie  Eastern  States 
has  been  very  large,  it  has  for  many  months  past  occasioned  a  continual  drain 
from  the  banks.  This  drain  has  been  mijeh  increased  by  a  trade  in  British  Gov- 
ernment Bills  of  Exchange,  which  has  been  extensively  carried  on,  and  has 
caused  very  large  sums  to  be  exported  from  the  United  States. 

"  To  meet  tliis  great  demand  for  specie,  the  course  of  trade  did,  for  a  considera- 
ble time,  enable  us  to  draw  large  supplies  from  the  Southern  States — but  the  un- 
happy situation  of  affairs  there,  having  deprived  us  of  that  resource,  and  circum- 
stances having  occurred,  which  have  in  a  considerable  degree  occasioned  alarm 
and  distrust,  it  became  a  serious  consideration,  whether  the  banks  should  con- 
tinue their  exertions  to  draw  within  their  vaults  tlie  specie  capital  of  the  country, 
and  thus  facilitate  the  means  of  exporting  it  from  the  United  States, — or  whether 
they  should  suspend  the  payment  of  specie,  before  their  means  were  exhausted." 

The  great  drain  from  the  east,  alluded  to  by  the  Philadelphia 
banks,  is  proved  by  the  comparative  view  of  the  specie  in  the 
vaults  of  the  banks  of  Massachusetts,  in  Jimc  1814,  immediately 
before  the  suspension  of  payments,  and  on  the  same  days  of  the 
preceding  and  succeeding  years, — 

This  amounted  on  the  1st  of  June  1811 


1811 

to 

f5il,7On,00O 

1812 

3,ni  .'3,000 

1813 

0,171,000 

1814 

7,326,000 

1815 

3,01.5,000 

1816 

1,270,000 

And  the  fact,  that  a  large  amount  of  British  government  bills 
was  sent  to  this  country  from  Canada  in  the  years  1812 — 1814, 
and  sold  at  20  and  22  per  cent,  discount,  is  corroborated  by  au- 
thentic information  from  several  (juarters.  Other  causes,  how- 
ever, concurred  in  producing  the  suspension  of  specie  payments. 
1.  The  circulating  capital  of  the  United  States,  which  must 
supply  the  loans  required  in  time  of  war,  is  concentrated  in  the 
large  cities,  and  principally  north  of  the  Potomac.  The  war 
was  unpopular  in  the  Eastern  States:  (bev  contrihufed  lc«sthan 
from  their  wealth  might  have  been  antiripnt^'d  :  and  fhe  bur- 
then fell  on  the  Middle  States.     The  proceeds  of  loans,  (exclu- 


44  BANKS  AND  CURRENCY. 

sively  of  Treasury  notes,  and  temporary  loans,)  paid  into  the 
Treasury  from  the  commencement  of  the  war  to  the  end  of  the 
year  1814,  amounted  to  forty -one  millions  ten  thousand  dollars. — 
Of  that  sum  the  Eastern  States  lent,  -  -  -  -  $2,900,000 
New- York,  Pennsylvania,  Maryland,  and  the  )        ok  -yon  ooo 

District  of  Columbia,  )  '       ' 

The  Southern  and  Western  States, _    _    _      2,320,000 

The  floating  debt,  consisting  of  outstanding  Treasury  notes  and 
temporary  loans  unpaid,  amounted,  on  the  1st  of  January  1815, 
to  eleven  millions  two  hundred  and  fifty  thousand  dollars,  about 
four-fifths  of  which  were  also  due  to  the  Middle  States.  Almost 
the  whole  of  the  large  amount,  advanced  to  government  in  those 
States,  was  loaned  by  the  cities  of  New- York,  Philadelphia,  and 
Baltimore,  and  by  the  District.  The  banks  made  advances  be- 
yond their  resources,  either  by  their  own  subscriptions  or  by 
enlarging  their  discounts  in  favor  of  the  subscribers.  They,  as 
well  as  several  wealthy  and  patriotic  citizens,  displayed  great 
zeal  in  sustaining  government  at  a  critical  moment ;  and  the 
banks  were  for  that  purpose  compelled  to  enlarge  their  issues. 

2.  The  dissolution  of  the  Bank  of  the  United  States  deprived 
the  country  of  a  foreign  capital  of  more  than  seven  millions  of 
dollars,  vested  in  the  stock  of  that  institution,  and  which  was 
accordingly  remitted  abroad  during  the  year  that  preceded  the 
war.  At  the  same  time,  the  state  banks  had  taken  up  a  con- 
siderable part  of  the  paper  formerly  discounted  by  that  of  the 
United  States.  As  the  amount  of  this  exceeded  fifteen  millions, 
their  aid  in  that  respect  was  absolutely  necessary,  in  order  to 
prevent  the  great  distress,  which  must  have  otherwise  attended 
such  diminution  of  the  usual  accommodations. 

3.  The  creation  of  new  state  banks,  in  order  to  fill  the  chasm, 
was  a  natural  consequence  of  the  dissolution  of  the  Bank  of  the 
United  States.  And,  as  is  usual  under  such  circumstances,  the 
expectation  of  great  profits  gave  birth  to  a  much  greater  num- 
ber than  was  wanted.  They  were  extended  through  the  inte- 
rior parts  of  the  country,  created  no  new  capital,  and  withdrew 
that  which  might  have  been  otherwise  lent  to  government,  or 
as  profitably  employed.  From  the  1st  of  January  1811,  to  the 
1st  of  January  1815,  not  less  than  one  hundred  and  twenty  new 
banks  were  chartered  and  went  into  operation,  with  a  capital 
of  about  forty,  and  making  an  addition  of  near  thirty  millions  of 
dollars  to  the  banking  capital  of  the  country.  That  increase 
took  place  on  the  eve  of,  and  during  a  war  which  did  nearly 
annihilate  the  exports,  and  both  the  foreign  and  coasting  trade. 
And,  as  the  salutary  regulating  power  of  the  Bank  of  the  Uni- 
ted States  no  longer  existed,  the  issues  were  accordingly  in- 
creased much  beyond  what  the  other  circumstances  already 
mentioned  rendered  necessary.     We  have  obtained  returns  of 


BANKS  AND  CURRENCY. 


45 


the  circulation  and  specie,  for  tlie  latter  end  of  the  years  1810, 
1814,  and  1815,  though  not  all  of  the  same  precise  date,  of  a 
sufficient  number  of  banks  to  enable  us  to  make  an  estimate  of 
the  whole,  which  cannot  vary  essentially  frcmi  the  truth.  Our 
returns  of  the  amount  of  deposits  are  too  partial  for  insertion ; 
our  authentic  returns  embrace  generally  the  states  of  Massa- 
chusetts, New-Hampshire,  Rhode  Island,  Pennsylvania,  Mary- 
land, Virginia,  and  the  District  of  Columbia,  and  give  the  fol- 
lowing result : 


On  or  near  Ist  Jan.  1811 —  50  State  Banks 
1815—120      " 
1816—134      " 

Capital 

Notes  in 
circulation 

Specie 

24,618,551 
45,272,076 
47,987,826 

13,170,401 
23,617,090 
31,702,050 

5,673.442 

11,505,077 

8,758,133 

Having  the  amount  of  the  capital  and  a  few  general  returns 
of  all  the  other  banks,  partly  guided  by  analogy,  and  partly 
by  their  respective  dividends,  we  annex  the  following  estimate 
of  the  whole : 


Ist  Jan.  1811— Bank  of  the  U.  S 

88  State  Banks 

Total 

1815—208  State  Banks 

1816—246     "         "        

Capital 

Notes  in 
circulation 

Specie 

10,000,000 
42,610,601 

5,400,000 
22,700,000 

5,800,000 
9,600.000 

52,610,601 
82,259,590 
89,822,422 

28.100,000 
45,500.000 
68,000,000 

15,400,000 
17,000,000 
19.000,000 

The  unequal  distribution  of  the  specie  on  the  1st  of  January, 
1815,  must  be  recollected. 


At  that  time  the   banks  of  the   four ' 
states   of  Maine,  Massachusetts,   Rhode 
Island,  and  New-Hampshire,  had 

The  states  of  Pennsylvania  and  Mary- 
land, with  the  District  of  Columbia,  had 

And  all  the  other  states 


Capital  Circulation         Specie 

$15,690,000       5,320,000     8,200,000 


26,000,000     13,750,000     3,000,000 
40,930,000     25,630,000     5,800,000 


The  increase  of  issues,  from  forty-five  and  a  half  to  sixty- 
eight  millions,  or  of  about  50  per  cent.,  within  the  first  fifteen 
months  of  the  suspension  of  specie  payments,  was  the  natural 
consequence  of  that  event.  We  must  observe,  that,  where  we 
were  obliged  to  resort  to  an  estimate,  the  amount  of  bank  notes 
is  set  down  rather  too  low  than  too  high.  Yet,  we  are  confident, 
that  for  the  three  dates  we  have  given,  the  actual  amount  can- 
not have  exceeded  thirty,  forty-seven,  and  seventy  millions  re- 
spectively. This  last  sum  falls  very  short  indeed  of  the  one 
hundred  and  ten  millions  which  were  supposed  to  have  been 
put  in  circulation  by  the  banks,  but  is  quite  suflicient  to  ac- 
count for  the  depreciation.  It  is  equal  to  the  present  amount 
of  the  currency ;  and  as  the  increase  of  wealth  during  the  last 
fourteen  years  has  at  least  been  in  the  same  proportion  as  that 
of  the  population,  the  amount  which  could  have  been  wanted 


46  BANKS  AND  CURRENCY. 

at  that  time  may  be  estimated  at  about  forty-six  millions,  in- 
cluding both  paper  and  specie.  It  is  therefore  clear  that  the 
equal  amount  in  bank  notes  alone,  which  had  been  put  in  cir- 
culation by  the  state  banks  before  the  year  1815,  were  more 
than  could  have  been  long  sustained,  preserving  at  the  same 
time  their  convertibility  into  specie.  Under  those  circumstances, 
the  alarm  caused  by  the  capture  of  Washington,  and  the  threat- 
ened attack  on  Baltimore,  was  sufficient  to  cause  a  suspension 
of  specie  payments.  It  took  place  at  that  particular  crisis,  and 
appears  to  have  originated  in  Baltimore.  The  example  was 
immediately  followed  in  Philadelphia  and  New-York ;  and  it  is 
indeed  known,  that  an  attack  was  apprehended  on  both  those 
places,  and  that  some  of  the  banks  of  Philadelphia  had  sent 
their  specie  to  Lancaster. 

We  have  stated  all  the  immediate  and  remote  causes  within 
our  knowledge,  which  concurred  in  producing  that  event ;  and 
although  the  effects  of  a  longer  continuance  of  the  war  cannot 
be  conjectured,  it  is  our  deliberate  opinion,  that  the  suspension 
might  have  been  prevented,  at  the  time  when  it  took  place, 
had  the  former  Bank  of  the  United  States  been  still  in  exist- 
ence. The  exaggerated  increase  of  state  banks,  occasioned  by 
the  dissolution  of  that  institution,  w^ould  not  have  occurred. 
That  bank  would,  as  before,  have  restrained  within  proper 
bounds,  and  checked  their  issues :  and,  through  the  means  of 
its  offices,  it  would  have  been  in  possession  of  the  earliest  symp- 
toms of  the  approaching  danger.  It  would  have  put  the  Trea- 
sury Department  on  its  guard ;  both  acting  in  concert,  would 
certainly  have  been  able  at  least  to  retard  the  event ;  and,  as 
the  treaty  of  peace  was  ratified  within  less  than  six  months 
after  the  suspension  took  place,  that  catastrophe  M'ould  have 
been  altogether  avoided. 

We  have  already  adverted  to  the  unequivocal  symptoms  of 
renewed  confidence  shown  by  the  rising  value  of  bank  notes, 
which  followed  the  peace.  This  would  have  greatly  facilitated 
an  immediate  resumption  of  specie  payments,  always  more  easy, 
and  attended  with  far  less  evils,  wdien  the  suspension  has  been 
of  short  duration.  The  banks  did  not  respond  to  that  appeal 
made  by  public  opinion ;  nor  is  there  any  evidence  of  any  pre- 
parations, or  disposition  on  their  part,  to  pay  their  notes  in 
specie,  until  after  the  act  to  incorporate  the  new  Bank  of  the 
United  States  had  passed.  We  are  inclined  to  ascribe  this  prin- 
cipally to  the  great  difficulty  of  bringing  the  various  banks,  in 
our  several  commercial  cities,  to  that  concert  which  was  indis- 
pensable. But  it  cannot  be  concealed,  that,  in  such  a  situation, 
the  immediate  and  apparent  interest  of  the  banks  is  in  opposi- 
tion to  that  of  the  public.  It  is  well  known,  that  the  Bank  of 
England,  though  apparently  disposed  at  first  to  resume  its  specie 
payments,  found  a  continued  suspension  extremely  convenient 


BANKS  AND  CURRENCY.  47 

and  profitable ;  that  during  that  period  of  twenty  years,  its  ex- 
traordinary profits,  besides  raising  the  usual  dividend  from  7  to 
10  per  cent.,  amounted  to  thirteen  millions  of  pounds  sterling, 
and  that  it  accordingly  threw  obstacles  in  the  way  of  the  re- 
sumption. The  state  banks  of  the  United  States  were  only  in- 
active in  that  respect,  and  did  not  impede  that  desirable  event: 
but  they  used  the  advantages  incident  to  the  situation  in  which 
they  were  placed ;  and  to  what  extent  their  issues  were  gene- 
rally increased,  has  already  been  shown. 

It  will  not  be  asserted,  that  any  reasonable  expectation  could 
have  been  entertained  of  a  voluntary  return  on  the  part  of  the 
state  banks  to  a  sound  currency,  unless  the  depreciation  had 
become  so  great  as  to  induce  the  community  at  large  to  reject 
their  notes.  Whether  this  arose  from  inability  or  unwillingness, 
a  remedy  was  equally  necessary.  Congress  does  not  appear  to 
have  inquired  whether  they  had  the  right  to  exercise  any  im- 
mediate control  over  the  issues  of  those  banks ;  and  the  question 
seems  to  have  laid  betAveen  the  establishment  of  a  national 
bank,  and  an  attempt  to  force  the  state  banks  to  pay  in  specie, 
by  the  refusal  of  their  notes  in  payment  of  debts  and  duties  due 
to  the  United  States,  so  long  as  those  notes  were  not  on  demand 
discharged  in  specie.  It  is  clear  that  such  an  attempt  must  have 
failed  altogether,  during  the  year  that  followed  the  peace,  and 
so  long  as  the  expenses  of  government  greatly  exceeded  its 
receipts.  The  bank  was  chartered  in  April,  1816,  and  it  must 
for  ever  remain  conjectural,  w-hether,  if  that  measure  had  not 
been  adopted,  and  after  the  floating  debt,  and  all  the  arrearages 
of  the  war  had  been  paid  or  funded,  and  the  receipts  of  the  trea- 
sury had  become  greater  than  its  disbursements,  an  attempt,  on 
the  part  of  the  government,  to  collect  the  revenue,  and  to  dis- 
charge the  public  expenses  in  specie,  would  have  compelled  the 
state  banks  to  resume  generally  specie  payments.  It  cannot,  at 
all  events,  be  doubted,  that  the  result  was  quite  uncertain,  and 
that  the  attempt  might  have  failed  at  the  very  outset,  from  the 
want  of  any  other  currency  than  bank  notes.  It  is  indeed  quite 
probable,  that,  in  that  case,  the  impossibility  to  collect  the  re- 
venue, might  have  induced  government  merely  to  substitute  an 
issue  of  its  own  paper  to  that  of  the  banks. 

It  will  be  found,  by  reference  to  the  Report  of  the  Secretary 
of  the  Treasury  of  December  1815,  that  his  recommendation  to 
establish  a  National  Bank  was,  in  express  terms,  called  "  a  propo- 
sition relating  to  the  national  circulating  medium,"  and  was 
exclusively  founded  on  the  necessity  of  restoring  specie  pay- 
ments and  the  national  currency.  He  states  it  as  a  fact  incon- 
testably  proved,  that  the  state  banks  could  not  at  that  time  be 
successfully  employed  to  furnish  an  uniform  national  currency. 
He  mentions  the  failure  of  one  attempt  to  associate  them  with 
that  view ;  that  another  attempt,  by  their  agency  in  circulating 


48  BANKS  AND  CURRENCY. 

Treasury  notes,  to  overcome  the  inequalities  of  the  exchange, 
has  only  been  partially  successful ;  that  a  plan  recently  pro- 
posed, with  the  design  to  curtail  the  issues  of  bank  notes,  to  fix 
the  public  confidence  in  the  administration  of  the  affairs  of  the 
banks,  and  to  give  to  each  bank  a  legitimate  share  in  the  circu- 
lation, is  not  likely  to  receive  the  general  sanction  of  the  banks ; 
and  that  a  recurrence  to  the  national  authority  is  indispensable 
for  the  restoration  of  a  national  currency.  Such  was  the  con- 
temporaneous and  deliberate  opinion  of  the  Officer  of  the  Gov- 
ernment, who  had  to  struggle  against  the  difficulties  of  a  paper 
currency,  not  only  depreciated,  but  varying  in  value  from  day 
to  day  and  from  place  to  place. 

*It  was  not  till  after  the  organization  of  the  Bank  of  the 
United  States,  in  the  latter  part  of  January  1817,  that  delegates 
from  the  banks  of  New- York,  Philadelphia,  Baltimore,  and  A^ir- 
ginia,  assembled  in  Philadelphia,  for  the  purpose  of  agreeing  to 
a  general  and  simultaneous  resumption  of  specie  payments,  A 
compact  proposed  by  the  Bank  of  the  United  States,  acceded  to 
by  the  state  banks,  and  ratified  by  the  Secretary  of  the  Treasu- 
ry, was  the  result  of  that  convention.  The  state  banks  engaged 
to  commence  and  continue  specie  payments,  on  various  condi- 
tions, relative  to  the  transfer  and  payment  of  the  public  balances 
on  their  books  to  the  bank  of  the  United  States,  and  to  the  sum 
which  it  engaged  previously  to  discount  for  individuals,  or  under 
certain  contingencies  for  the  said  banks,  and  also  with  the  ex- 
press stipulation,  that  the  Bank  of  the  United  States,  upon  any 
emergency  which  might  menace  the  credit  of  any  of  the  said 
banks,  would  contribute  its  resources  to  any  reasonable  extent 
in  support  thereof,  confiding  in  the  justice  and  discretion  of  the 
banks  respectively,  to  circumscribe  their  affairs  within  the  just 
limits  indicated  by  their  respective  capitals,  as  soon  as  the  inter- 
est and  convenience  of  the  community  would  admit.  To  that 
compact,  which  was  carried  into  complete  effect,  and  to  the  im- 
portation of  more  than  seven  millions  of  dollars  in  specie  from 
abroad  by  the  Bank  of  the  United  States,  the  community  is  in- 
debted for  the  universal  restoration  of  specie  payments,  and  for 
their  having  been  sustained,  during  the  period  of  great  difficulty 
and  of  imexampled  exportation  of  specie  to  China,  which  im- 
mediately ensued. 

Among  the  difficulties  which  the  bank  had  to  encounter,  must 
be  reckoned  the  effort  made  to  alleviate  the  distress  which 
always  attends  the  return  from  a  depreciated,  to  a  sound  cur- 
rency. The  Western  States  having  less  capital,  are,  in  the  course 
of  trade,  generally  indebted  to  the  Atlantic  seaports.  Whether 
owing  to  larger  purchases  of  public  land  than  usual,  to  an  ex- 

*  The  following  details  are  borrowed  from  the  pamphlet  signed  "Monitor," 
which  is  well  known  to  have  come  from  an  authentic  source. 


BANKS  AND  CURRENCY. 


49^ 


cited  spirit  oC  enterprise,  or  to  any  other  cause,  it  appears,  that 
at  that  time,  the  amount  of  debts  due  by  the  West,  either  to  the 
East  or  to  Government,  was  unusually  large.  The  several  west- 
ern offices  of  the  Bank  of  the  United  States  discounted  largely^ 
probably  to  too  great  an  extent.  The  eastern  creditors  were 
generally  paid,  the  western  state  banks  relieved,  and  the  debt 
transferred  to  the  Bank.  Thus  we  find  that  the  issues  of  the  Bank 
of  Kentucky,  which,  in  1816,  exceeded  one  million  nine  hundred 
and  fifty  thousand  dollars,  were,  in  1819,  reduced  to  six  hundred 
and  seventy  thousand  dollars.  This  could  not  be  done,  without 
large  issues  of  branch  notes,  or  of  drafts  on  the  Parent  Bank 
and  the  northern  oflices  which  drained  these  of  their  capital.* 
Although  great  curtailments  had  taken  place,  near  six  millions 
and  a  half  of  dollars  of  the  capital  of  the  bank  were,  in  the 
spring  of  the  year  1819,  distributed  amongst  the  interior  western 
oflices,  whilst  the  whole  amount  allotted  to  the  offices  north  and 
east  of  Philadelphia,  was  less  than  one  million.  The  proper 
equilibrium  could  not  be  reinstated  without  a  revulsion  and  an 
uncommon  pressure  on  the  west,  in  order  to  lessen  the  amount 
of  its  debt.  The  attempts  to  counteract  that  effiict  by  the  cre- 
ation of  a  great  number  of  local  banks,  could  not  but  fail,  and 
must  have  aggravated  instead  of  relieving  the  evil.  The  unpopu- 
larity which  attached  to  the  Bank  of  the  United  States,  when 
it  found  itself  compelled  to  enforce  the  payment  of  such  a  large 
debt,  and  the  attempt  to  alleviate  the  distress  by  relief  laws, 
which,  though  injudicious,  ought  not,  in  that  state  of  things,  to 
be  too  severely  judged,  are  well  known,  and  were  the  natural 
consequences  of  the  course  which  had  been  originally  pursued. 
The  year  1819  having  been  one  of  great  difficulty,  we  annex 
an  estimate  of  the  situation  of  the  banks  for  the  latter  end  of  it. 
The  Secretary  of  the  Treasury  gave  a  partial  one,  in  his  report 
on  currency  of  the  year  1820,  to  which  we  have  made  some 
additions  and  corrections  from  bank  returns  of  a  nearer  date  to 
the  1st  of  January  1820,  than  he  had  then  obtained.  The  por- 
tion, on  estimate,  embraces  almost  the  whole  of  the  banks  of 
Connecticut,  New  Jersey,  New  York,  and  Maryland,  Mr.  S. 
Girard's,  about  one-half  of  those  of  South  Carolina,  Louisiana, 
and  Alabama,  and  one-fourth  of  those  of  Kentucky.  The  re^ 
turns  of  those  of  the  other  states  arc  complete. 


1st  January,  1820. 

Capital 

Notes  in 
circulation 

Deposits 

Specie 

212  ascertained  State  Banks 
95  estimated         "         " 

62,735.842 
39,374,769 

26,641,574 
14,000,000 

19,444.959     10.672,263 
11,800.000       6.000,000 

307  State  Banks 

United  Stales  Bank  .  .  . 

102,110,611 
35,000,000 

40.641,574 
4,221,770 

31,244,959      16,672,263 
4,705,511        3,147.977 

Total 

137,110,611  1  44,863,344  |  36,950,470  |  19,820,240| 

•  Mr.  Chaves's  Exposition. 


50  BANKS  AND  CURWENCy. 

It  appears  from  that  statement,  that  the  amount  of  notes  irf 
circulation  was  only  about  one  million  less  than  immediately 
before  the  suspension  of  specie  payments,  whilst  on  the  other 
hand,  the  amount  of  specie  in  the  vaults  of  the  banks  was  nearly 
two  millions  greater.  But  it  has  been  seen,  that,  on  the  1st  of 
January  1816,  the  paper  currency  amounted  to  sixty-eight 
millions.  So  great  a  reduction  in  the  issues  of  the  banks,  could 
not  have  been  effected  without  a  corresponding  diminution  of 
their  discounts.  Debts  contracted  during  the  suspension  of  spe- 
cie payments,  and  whilst  the  currency  was  depreciated,  became 
payable  at  par.  The  distress,  therefore,  that  took  place  at  that 
time,  may  be  clearly  traced  to  the  excessive  number  of  state 
banks  incorporated  subsequently  to  the  dissolution  of  the  first 
Bank  of  the  United  States,  and  to  their  improvident  issues. 
Those  of  the  country  banks  of  Pennsylvania  alone,  amounted, 
in  November  1816,  to  $4,756,460,  and  had  been  reduced  in 
November  1819,  to  $1,318,976.  A  committee  of  the  Senate  of 
that  state,  appointed  in  December  1819,  to  inquire  into  the 
extent  and  causes  of  the  present  general  distress,  ascribe  it,  as 
we  do,  to  the  improvident  creation  of  so  many  banks,  as  will 
appear  from  the  following  extract  from  their  report : — 

"  At  tlie  foUov/ing-  session,  the  subject  was  renewed  with  increased  ardor,  and 
a  bill  authorizingf  the  incorporation  of  forty -one  banking  institutions,  with  capitals 
amounting  to  upwards  of  seventeen  millions  of  dollars,  was  passed  by  a  large  ma- 
jority. This  bill  was  also  returned  by  the  governor,  with  additional  objections ; 
but  two-thirds  of  both  houses  (many  members  of  which  were  pledged  to  their 
constituents  to  that  elfcct)  agreeing  on  its  passage,  it  became  a  law  on  the  21st 
of  March  1814,  and  thus  was  inflicted  upon  the  commomoealth  an  evil  of  a  more 
disastrous  nature  than  has  ever  been  experienced  by  its  citizens.  Under  this  law, 
thirty-seven  bnnks,  four  of  which  were  CKtablislicd  in  Philadelpliia,  actually  went 
into  operation." 

The  numerous  failures  which  had  preceded  the  year  1819,  or 
have  since  taken  place,  have  also  been  principally  due  to  the 
same  causes.  We  have  an  account  of  165  banks  that  failed 
between  the  1st  of  January  1811  and  the  1st  of  July  1830.  The 
capital  of  129  of  these  amounted  to  more  than  twenty-four  mil- 
lions of  dollars  stated  as  having  been  paid  in.  The  whole 
amount  may  be  estimated  at  near  thirty  millions ;  and  our  list 
may  not  be  complete.  The  capital  of  the  state  banks  now  ex- 
isting amounts  to  about  110  millions.  On  a  total  capital  of  one 
hundred  and  forty  millions,  the  failures  have  amounted  to  thirty, 
or  to  more  than  one-fifth  of  the  whole.  Of  the  actual  loss  in- 
curred, we  can  give  no  account.  There  are  instances  in  which 
the  stockholders,  by  paying  for  their  shares  in  their  own  notes^ 
and  afterwards  redeeming  their  notes  with  the  stock  in  their 
name,  suffered  no  loss ;  and  this  fell  exclusively  on  the  holders 
of  bank-notes  and  dej)ositors.  In  many  cases,  where  the  whole 
stock  has  been  lost,  the  holders  of  notes  have  nevertheless  ex- 
perienced a  partial  loss.  In  the  most  favorable  cases,  the  stock- 
holders lost  a  considerable  portion  of  tlicii-  stock;  and  all  the 


BANKS  AND  CURRENCY.  51 

debts  will  be  ultimately  paid.  But  even  then  there  has  been 
a  heavy  loss  on  the  community ;  the  notes  having  been  gene- 
rally sold  by  the  holders  at  a  depreciated  rate,  at  the  time  when 
the  failure  took  place.  We  believe  that  the  pecuniary  loss  sus- 
tained by  the  government,  on  the  loans  raised  during  the  sus- 
pension, and  froTn  bank  failures,  exceeded  four  millions  of  dollars. 
The  active  industry  of  the  country  has  enabled  it  to  recover 
from  that  depressed  state ;  and  we  will  now  give  a  view  of  the 
situation  of  the  state  banks  and  of  that  of  the  United  States, 
at  the  close  of  the  year  1829.  We  have  returns  of  two  hunr 
dred  and  eighty-one  state  banks,  which  have  a  capital  of 
95,003,557  dollars.  Of  the  forty-eight  other  banks  we  have 
only  the  capital,  amounting  to  15,188,711  dollars,  and  some 
incomplete  returns ;  and  of  thirty  banks  of  the  state  of  New- 
York,  of  which  we  have  complete  returns,  fourteen  only  are 
for  the  1st  of  January  1830,  the  sixteen  others  being  for  the 
1st  of  January,  1828.  This  last  circumstance  makes  the 
amount  of  specie  appear  probably  one  million  of  dollars  less 
than  it  actually  was  at  the  end  of  the  year  1829.  The  forty- 
eight  banks,  of  the  situation  of  which  we  have  no  return,  are 
distributed  as  follows,  viz. 

In  Connecticut, 3 

New- York, 7 

New-Jersey,      -- --.-13 

Pennsylvania,* 1 

Delaware, -...       i 

Maryland, 4 

South  Carolina, 4 

Louisiana,     -     -     -     (branches  of) 1 

Alabama, 1 

Ohio, (all) 11 

Michigan  and  Florida, 2 

Estimating  these  in  the  same  manner  as  in  the  preceding 
statements,  we  have  the  following  results : 

1.  For  the  states  of  Maine,  New-Hampshire,  Vermont,  Mas- 
sachusetts, and  Rhode-Island, 

Capital, 1130,812,692 

Notes, 7,394,566 

Deposits, 4,203,895 

Specie, 2,194,768 

For  the  states  of  Connecticut,  New-York,  and  New-Jersey, 

Capital, 26,585,539 

Notes, 12,737,539 

Deposits, 14,594,145 

Specie, 2,841,746 

•  Mr.  Girard's  bank,  the  capital  of  which  is  rnte<l  at  81,800,000,  being  the  Biim  on 
which  the  stamp  duly  won  formerly  pnid. 


53 


BANKS  AND  CURRENCY. 


For  th6  states  of  Pennsylvania,  Delaware,  Maryland,  and 
the  District  of  Columbia, 

Capital, -     *  $25,566,622 

Notes, 11,274,086     . 

Deposits, 10,850,739 

Specie, •    4,170,592 

For  the  four  Southern  States, 

Capital, $17,600,129 

Notes, 12,183,863 

Deposits,     ...........  6,952,194 

Specie,  -----.......,  3,046,141 


For  the  Western  States,* 

Capital, 

Notes,    ...... 

Deposits,     .     .     *     .     - 
Specie, 


9,629,286 
4,684,860 
4,180,146 
2,686,396 


II.  Distinguishing  the  cities  of  Boston,  Salem,  New-Yorkj 
Philadelphia,  Baltimore,  Charleston,  and  New-Orleans,  fi'om 
the  rest. 


Seven  cities. 

Capital,      ....  $53,211,605 

Notes, 17,144,422 

Deposits,     ....  23,137,129 

Specie,       ....  7,258,025 


Remainder 
of  the  United  States. 

56,98,0,663 
31,130,492 
17,643,990 

7j681,618 


III.  Situation  of  the  Bank  of  the  United  States,  on  the  1st 
.of  November,  1829. — 


jCr. 
Funded  debt.    .     .     - 
Notes  discount- 
ed, -    -    -    $39,541,124 
Domestic  bills,      7,476,321 


Foreign  account,  ... 
Due  from  banks,  843,551 
Notes  of  ditto,       1,531,528 


$11,717,071 


40,017,445 
1,161,001 


2,375,079 

Specie, 7,175,274 

Real  estate, 3,876,404 


66,322,274 


Dr. 

Capital, $34,996,270 

Notes  in  circulation,    -    -     13,048,984 

Deposits, 14,778,809 

Balance  in  transitu  from 
bank  and  offices  on  each 
other,  ..-.-.  732,082 
Surplus  fund,  after  deduct, 
ing  losses  already  charge- 
able to  it,  including  that 
of  Baltimore,   ....    2,766,129 


€6,322,274 


IV.  The  progressive  impr6vement  of  the  Bank  of  the  United 
States,  and  the  talent  with  which  it  has  been  administered, 
are  exhibited  in  the  following  comparative  view  of  the  princi- 
pal items  of  its  situation,  on  the  first  days  of  November,  1819 
and  1830:— 

*  There  are  not  now  any  state  banks  in  operation  in  the  states  of  Kentucky,  In- 
i^iana,  Illinois,  and  Missouri. 


BANKS  AND  CURRENCY.  ^ 

November  1.                                      1819.  1830. 

Notes  discounted  on  Bank  Stock,     -     $7,759,980  719,195 

Notes  discounted  on  personal  security,  21,423,623  32,665,035 

Domestic  Bills, 1,386,174  7,954,290 

Deposits, 4,705,512  12,650,752 

Specie, 3,147,977  11,436,175 

Due  to  Baring,  Brothers  &  Co.    -    -      2,333,937 

Due  from             ditto, 2,778,653 

Bank  notes  issued, 4,221,770  18,004,680 

deduct  in  transitu,      ....         411,659  2,823,135 


In  actaal  circulation. 


J,810,lll      15,181,545 


V.  The  following  estimate  gives  the  general  result  for  the 
end  of  the  year  1829 — 


£81  Banks  ascertained, 

48     do.  estimated 

329*     

Capital 

Notes 

Deposits 

Specie 

95,003,557 
15,188,711 

39,174,914 
9,100,000 

32,531,119 
8,250,000 

11,989,643 
2,950,000 

110,192,268 
35,000,000 

48,274.914 
13,048,984 

40,781,119 
14,778,809 

14,939,643 
7,175,274 

United  States  Bank  .  .  . 

145,192,268  1  61,323,898  |  55,559,928  |  22,114,917| 

It  will  be  perceived,  by  the  last  item  of  No.  IV.,  that  there 
ifi  always  a  large  amount  of  the  notes  of  the  Bank  of  the  United 
States,  issued  and  inserted  in  the  usual  returns,  which  are  not 
in  actual  circulation.  They  consist  of  notes  received  in  pay- 
ment of  duties,  or  otherwise,  by  other  offices  than  those  by  which 
they  had  been  issued,  and  transmitted  back  to  them.  The 
amount,  at  the  end  of  1829,  in  No.  IV.,  is  that  of  the  nett  circu- 
lation. On  the  other  hand,  the  drafts  from  the  bank  on  offices, 
and  from  these  on  the  bank  and  on  each  other  in  actual  circu- 
lation, should,  as  has  been  observed,  be  considered  as  making 
part  of  it.  The  total  annual  amount  of  those  drafts  is  about 
twenty-four  millions  of  dollars,  and  they  are  on  an  average  paid 
within  fifteen  days  after  being  issued.  The  amount  always  in 
circulation  may  therefore  be  estimated  at  one  million,  which, 
added  to  the  thirteen  millions  of  bank  notes,  gives  fourteen  mil- 
lions for  the  actual  circulation  of  the  bank.  We  may  therefore 
estimate  the  total  amount  of  the  paper  currency  of  the  United 
States,  on  the  1st  of  January,  1830,  at  about  sixty-two  millions 
and  a  half. 

All  the  banks  receive  notes  issued  by  the  other  institutions, 
the  returns  of  which,  that  have  been  obtained,  being  incom- 
plete, have  not  been  inserted  in  the  preceding  statements.  Fr6m 
an  examination  of  a  number  of  these,  in  various  sections  of  the 

•  Wo  have  not  included  in  tUis  nmoimt  ncvornl  hunks  -Jfiloly  tlinrlcred,  but  not  la 
OTwmtion  on  the  iM  of  .Innimrv,  1830. 


54  BANKS  AND  CURRENCY. 

country,  and  embracing  banks  with  an  aggregate  capital  of, 
more  than  twenty  milHons  of  dollars,  we  think  that  the  notes 
of  that  description  make  more  than  one-fifth  of  the  total  amount 
of  their  issues,  in  those  situated  north  of  the  Potomac,  and  about 
one-eighth  in  the  Southern  States.  The  average  of  notes  of 
state  banks  on  hand,  in  the  Bank  of  the  United  States  and  its 
offices,  amounted,  during  the  year  1829,  to  about  one  million 
and  a  half.  There  is,  therefore,  always  a  sum  of  about  nine  or 
ten  millions  of  dollars,  or  not  less  than  one-seventh  part  of  the 
\vhole  amount  issued,  which  is  not  in  actual  circulation.  If  the 
banks  did  not  receive  any  notes  but  their  own,  it  would  seem 
that  a  nearly  equal  amount  of  these  would  be  returned  upon 
them,  and  that  the  real  amount  of  those  in  actual  circulation 
should  not  be  estimated  at  more  than  fifty-three  and  a  half  mil- 
lions of  dollars.  We  have  however  adopted  throughout  the 
usual  mode  of  computation. 

If  to  the  amount  of  notes  we  add  the  deposits,  we  will  have 
a  total  of  either  one  hundred  and  eighteen,  or  one  hundred  and 
nine  millions,  according  to  each  of  those  two  modes  of  compu- 
ting, for  the  circulation  of  all  the  banks.  This  is  sustained  by 
a  sum  of  twenty-two  millions  in  specie,  which  makes  no  part  of 
the  circulation.  There  are  no  means  of  ascertaining  correctly 
the  portion  which  consists  of  the  precious  metals.  The  silver 
coinage  of  England  forms  nearly  one-seventh  part  of  the  whole 
circulation  of  that  country.  At  that  rate,  that  of  the  United 
States,  allowing  for  the  various  considerations  which  may  affect 
the  question,  cannot  be  estimated  at  more  than  ten  millions.  It 
is  well  known,  that  gold  has  been  altogether  excluded  by  the 
mint  regulations. 

We  have  therefore  the  following  results,  according  to  the 
,view  of  the  subject,  which  may  be  adopted : 

Gross  amount  of  notes  issued, $62,500,000 

Silver  coins, 10,000,000 

Usual  mode  of  computing,         1,      .     -     -     .       72,500,000 
And  if  deposits  are  included,        55,500,000 

2,  ....     128,000,000 

But  if  the  bank  notes  of  other  banks  on  hand  are 

deducted,  the  notes  in  circulation  will  be     -    $53,500,000 
Silver,        10,000,000 

3,  -     -     -     -       63,500,000 
And  if  deposits  are  included, 55,500,000 

4,  -     -     -     -     119,000,000 

Which  last  appears  to  us  the  most  correct  mode  of  compu- 
tation. 


BANKS  AND  CURRENCY.  65 

Although  we  have  freely  expressed  our  opinion,  that,  taking 
into  consideration  all  the  circumstances  which  belong  to  the  sub- 
ject, it  might  have  been  preferable  in  the  United  States  to  hav6 
had  nothing  but  a  metallic  currency,  we  are  quite  aware  that 
this  is  not  at  this  time  the  question.  We  are  only  to  inquire, 
whether  any  other  or  better  security  can  be  found,  than  that 
which  is  aiibrded  ])y  the  Bank  of  the  United  States,  against 
either  the  partial  failures  of  banks,  the  want  of  an  uniform 
currency,  or  a  general  suspension  of  specie  payments.  The 
great  difficulty  arises  from  the  concurrent,  and  perhaps  debate- 
able  jurisdiction  of  the  general  and  state  governments :  and  we 
are  to  examine,  not  only  what  are  the  provisions  necessary  to 
attain  the  object  intended,  but  also  by  what  authority  the 
remedy  must  be  administered. 

The  essential  ditferencc  between  banking  and  other  commer- 
cial business,  is,  that  merchants  rely,  for  the  fulfilment  of  their 
engagements,  on  their  resources,  and  not  on  the  forbearance  of 
their  creditors,  whilst  the  banks  always  rely,  not  only  on  their 
resources,  but  also  on  the  probability  that  their  creditors  will 
not  require  payment  of  their  demands.  We  have  already  seen, 
that  this  probability  is  always  increased  or  lessened,  in  propor- 
tion as  the  issues  of  the  banks  are  moderate  or  excessive.  One 
of  the  most  efficient  modes  to  reduce  the  amount  of  bank  notes, 
as  compared  to  the  total  amount  of  the  currency  of  the  country, 
consists  in  the  increase  of  the  metallic  currency  which  circulates 
amongst  the  people,  independent  of  that  which  is  kept  in  reserve 
in  the  vaults  of  the  banks.  It  is  evident,  that,  inasmuch  as  only 
a  certain  afhount  of  sound  currency  is  wanted,  and  can  be  sus- 
tained, that  part  which  consists  of  bank  notes  must  be  lessened, 
and  thereby  made  safer,  as  the  metallic  portion  is  increased. 
Whenever  also  the  specie  of  the  banks  is  drained  by  any  extra- 
ordinary demand  whatever,  delays,  and  often  difficulties,  may 
arise  in  the  importation  of  a  supply  from  abroad ;  which  is, 
however,  the  only  resource,  when  the  circulating  metallic  cur- 
rency has  nearly  disappeared. 

We  have  had  an  opportunity  to  witness  in  France  the  salutary 
effects  of  a  currency  consisting  principally  of  the  precious 
metals,  not  only  in  cases  of  great  national  difficulty,  but  also  for 
the  specific  purpose  of  reinstating  a  bank  momentarily  endan- 
gered by  over  issues  of  paper.  IJut  we  prefer  referring  to  the 
evidence  of  a  verv  able  and  practical  witness,  who  was  also 
deeply  interested  in  the  issue,  and  we  will  extract  this,  from  the 
work  of  another  distinguished  and  practical  writer.* 

"  Of  the  comparative  facility  with  which  the  coffers  of  a  bank 
which  has  suffered  too  great  a  reduction  of  its  reserves  by  im- 
prudent issues  of  paper  may  be  replenished  out  of  a  circulation 

*  Tooke  on  Currency. 


S6  BANKS  AiSm  CURRENCY. 

consisting  in  great  proportion  of  coin,  notwithstanding  a  coinci- 
dent demand  for  large  payments  abroad,  a  strong  instance  is  af-' 
forded  in  the  case  of  the  Bank  of  France,  in  1817  and  1818. 
The  circumstance  is  thus  stated  in  Mr.  Baring's  evidence  in 
March  1819.  (Vide  Report  of  Lord's  Committee  on  the  resump- 
tion of  cash  payments,  p.  103.)  Speaking  of  a  drain  which  that? 
bank  had  experienced,  he  says  :~ 

"  Their  bullion  was  reduced,  by  imprudent  issues,  from  one  hundred  and  sev- 
enteen millions  of  francs,  to  thirty-fpur  millions  of  francs,  and  has  returned,  by 
more  prudent  and  cautious  measures,  to  one  hundred  millions  of  francs,  at  which 
it  stood  ten  days  ago  when  I  left  Paris.  This  considerable  change  took  place 
since  the  first  week  in  November,  when  the  amount  of  specie  in  that  bank  was 
at  its  lowest.  It  must,  however^  be  always  recollected,  that  tliis  operation  took 
place  in  a  country,  every  part  of  the  circulation  of  which  is  saturated  with  specie, 
and,  therefore,  no  inference  can  be  drawn  in  favor  of  the  possibility  of  so  rapid 
an  operation  in  this  country,  wliere,  owing  to  the  absence  of  specie  in  circulation, 
the  supply  must  entirely  come  from  abroad ;  for  in  Paris,  tliough  some  portions 
may  have  come  from  foreign  countries,  the  great  supply  must  undoubtedly  have^ 
come  through  all  the  various  small  channels  of  circulation  through  that  kingdom." 

"  Again,  in  the  same  evidence,  p.  105 : — 

"Q.  Has  not  France,  after  two  years  of  great  scarcity  in  corn,  and  two  years 
of  foreign  contribution,  been  able  to  contribute  a  proportion  of  the  precious, 
metals  to  the  wants  of  Russia  and  Austria  ? 

"  A.  Undoubtedly,  the  precious  metals  have  been  supplied  from  France  to  Rus- 
sia and  Austria,  and  shipped,  to  a  considerable  amount,  to  America,  notwith- 
standing the  payments  to  foreign  powers,  and  very  large  payments  for  imported 
corn,  whilst,  at  the  same  time,  wine  having  almost  totally  failed  for  several  years 
past,  they  were  deprived  of  the  most  essential  article  of  their  export." 

"  And,  in  reference  to  these  payments,  in  the  preceding  an- 
swer, Mr.  Baring  states,  that  they 

'  Produced  no  derangement  whatever  of  the  circulation  of,  that  country 
(France.)' 

"  It  may  not  be  unimportant  further  to  remark,  that  the  state 
of  the  currency  in  France,  ever  since  the  suppression  of  the 
assignats,  appears  to  be  decisive  of  the  great  advantages  attend- 
ing a  metallic  circulation,  in  times  of  political  difficulty  and 
danger.  On  no  one  great  occasion  did  her  efforts  appear  to  be 
paralyzed,  or  even  restricted,  by  any  derangement  of  the  cur- 
rency ;  and  in  the  tvvo  instances  of  her  territory  being  occupied 
by  an  invading  army,  there  does  not  appear  to  have  been  any 
material  fluctuation  in  its  value." 

We  perceive  but  tvA^o  means  of  enlarging  the  circulating  me- 
tallic currency,  1st,  the  suppression  of  small  notes;  2d,  the 
measures  necessary  to  bring  again  gold  into  circulation. 

The  first  measure  is  that,  which,  after  long  experience,  a  most 
deliberate  investigation,  and,  notwithstanding  a  strenuous  oppo- 
sition by  the  parties  interested,  has  been  finally  adopted  and  per- 
severed in  by  the  government  of  Great  Britain.  By  the  sup- 
pression of  all  notes  of  a  denomination  less  than  £5  sterling,  in 
England,  Wales,  and  Ireland,  the  amount  of  the  circulating 
metallic  currency  has  become  equal  to  that  of  bank  notes  of 


BANKS  AND  CURRENCY.  57 

every  description.  That  metallic  currency  consists  of  eight  mil- 
lions sterling  in  silver,  which  is  receivable  only  in  payments  not 
exceeding  forty  shillings,  and  of  twenty-two  millions  sterling  in 
gold.  This  measure  has  given  a  better  security  against  fluctua- 
tions in  the  currency,  and  a  suspension  of  specie  payments,  than 
had  been  enjoyed  during  the  thirty  preceding  years.  In  France, 
where  the  Bank  of  France  is  alone  authorized  to  issue  bank 
notes,  and  none  of  a  denomination  under  five  hundred  francs, 
its  circulation  hardly  ever  reaches  ten  millions  sterling,  or  about 
one-tenth  part  of  the  currency  of  the  country.  In  the  United 
States,  all  the  banks  issue  notes  of  five  dollars.  The  states  of 
Pennsylvania,  Maryland,  and  Virginia,  and  perhaps  some 
others,  haA'e  forbidden  the  issue  of  notes  of  a  lower  denomina- 
tion, to  the  great  convenience  of  the  community,  and  without 
experiencing  any  of  "the  evils  which  had  been  predicted.  We 
have  seen,  in  Pennsylvania,  the  chasm  occasioned  by  that  sup- 
pression instantaneously  filled  by  silver,  without  the  least  dimi- 
nution in  the  amount  of  currency.  We  cannot  but  earnestly 
wish,  that  the  other  states  may  adopt  a  similar  measure,  and 
put  an  end  to  the  circulation  of  the  one,  two,  and  three  dollar 
notes,  which  is  of  no  utility  but  to  the  banks.  Those  small  notes 
are,  as  a  currency,  exclusively  local,  and  a  public  nuisance : 
and,  in  case  of  the  failure  of  any  bank,  the  loss  arising  from 
them  falls  most  heavily  on  the  poorest  class  of  the  community. 
We  have  no  other  data  to  estimate  the  proportion  they  bear  to 
the  whole  amount  of  notes,  than  the  returns  of  the  banks  of 
Massachusetts  and  Maine,  subsequent  to  January  1825;  by 
which  it  appears,  that,  in  those  states,  those  small  notes  make 
one-fifth  part  of  the  whole  paper  currency.  But  we  would 
wish  to  go  further  than  this,  and,  in  order  to  bring  gold  more 
generally  into  circulation,  that  all  notes  under  the  denomination 
of  ten  dollars  might  be  suppressed.  The  five  dollar  notes  of  the 
Bank  of  the  United  States,  constitute  less  than  one-sixth  part  of 
its  circulation,  and  amount  in  value  to  two-thirds  of  that  of  its  ten 
dollar  notes.  From  those  data,  taking  into  consideration  the 
amount  of  currency  of  the  states  where  the  small  notes  do  not 
circulate,  and  allowing  that  a  portion  of  the  five  would  be  sup- 
plied by  ten  dollar  notes,  the  reduction  in  the  amount  of  the 
paper  currency,  arising  from  a  suppression  of  the  small  notes, 
may  be  estimated  at  six,  and  that  produced  by  the  suppression 
of  the  five  dollar  notes  at  about  seven  millions.  Both  together 
would  probably  lessen  the  paper  currency  by  one-fifth,  and  sub- 
stitute silver  and  gold  coins  in  lieu  thereof. 

We  have  already  adverted  to  the  erroneous  value  assigned  to 
gold  coins  by  the  laws  which  regulate  the  Mint  of  the  United 
States.  The  relative  value  of  that  metal  to  silver  was,  by  the 
law  of  1790,  fixed  at  the  rate  of  15  to  1.  In  England  it  was  at 
♦hat  time  at  the  rate  of  15.2  to  1 ;  and  it  had  in  France,  after 

■  u 


58  BANKS  AND  CURRENCY. 

an  investigfitlon  respecting  the  market  price  of  both  metals, 
been  established  at  the  rate  of  15^  to  1,  as  early  as  the  year 
1785.  From  that  to  this  time,  gold  corns  have  never  been  be- 
low par  in  that  country,  and  have  generally  commanded  a  pre- 
mium, varying  from  one-  fifth  to  one  per  cent.,  but  which,  on  an 
average,  has  been  rather  less  than  one-half  per  cent.  This  ratio' 
in  all  those  instances  is  that  of  gold  to  silver  coins,  but  the  dif- 
ference is  greater  between  gold  and  silver  bullion.  Whether 
the  expense  of  coinage  is  defrayed  gratuitously  by  government, 
or  a  seignorage  is  charged  to  individuals,  coins  not  debased  or  de- 
teriorated will  almost  always  command  a  higher  price  than  bul- 
lion containing  the  same  quantity  of  pure  metal,  on  account  of 
their  greater  utility,  and  of  the  cost  of  coinage.  It  is  only  when 
there  is  at  the  same  time  a  redundancy  of  coin,  a  scarcity  of 
bullion,  and  a  great  demand  for  plate  or  other  manufactures, 
that,  when  the  general  coinage  is  sound,  coins  will  be  melted, 
and  the  price  of  bullion  be  equal  to  that  of  coins.  Should, 
however,  the  coinage  be  deteriorated,  new  good  coins  will  be 
melted  as  soon  as  they  issue  from  the  mint,  and  there  is  no  rem- 
edy but  a  general  recoinage  at  the  public  expense.  According 
to  the  mint  laws  of  England,  an  ounce  of  standard  gold  (contain- 
ing, like  ours,  eleven-twelfths  pure  and  one-twelfth  alloy)  is 
coined  into  £3  17s.  lO^d.  sterling;  and,  in  the  present  sound 
state  of  its  gold  coinage,  the  average  price  of  bullion  of  the 
same  standard  may  be  estimated  as  775.7^.  No  solid  reason  can 
be  assigned,  why  the  actual  cost  of  coinage  should  not  be  charged 
by  government.  In  point  of  fact,  the  delay  of  two  months,  which 
elapse  between  the  deposit  of  bullion  in  the  Mint  of  the  United 
States,  and  the  delivery  of  the  coins,  is  nearly  equal  to  a  charge 
of  1  per  cent;  but  does  not  assist  in  defraying  the  expenses  of 
the  mint,  and  has  the  disadvantage  of  being  the  same  on  both 
metals.  When  the  annual  silver  coinage  of  our  mint  reaches  three 
millions  of  dollars,  the  expense  may  be  estimated  at  1  per  cent. 
The  expense  on  the  same  value  of  gold,  no  silver  being  coined, 
would  amount  to  about  one-half  per  cent.  The  coinage  of  six 
millions,  half  in  silver  and  half  in  gold,  might  be  estimated  at  1 
per  cent,  on  the  first,  and  one-fifth  per  cent,  on  the  gold.  It  is 
obvious,  indeed,  that  it  is  more  expensive  to  coin  five  silver 
pieces,  worth  one  dollar  each,  than  one  gold  piece  worth  five 
dollars.  A  seignorage  at  the  last-mentioned  rate  might  be  ad- 
vantageously substituted  to  the  present  mode,  and  would  only 
require  a  moderate  constant  appropriation,  that  might  enable 
the  mint  to  pay  for  the  bullion  at  the  time,  or  at  least,  within 
ten  days  of  its  delivery. 

In  France,  the  mint  allows  3091  francs  for  each  kilogramme 
of  standard  gold.  This  is  coined  into  gold  coins  of  the  nominal 
value  of  3100  francs,  being  a  deduction  or  seignorage  of  less  than 
three-tenths  per  cent.    The  mint  price  of  standard  silver  is  197 


BANKS  AND  CURRENCY.  59 

francs  the  kilogramme,  which  is  coined  into  silver  coins  of  the 
nominal  value  of  200  francs;  the  deduction  or  seignorage 
amounting  to  1^  per  cent.  This  is  too  great,  and  is,  at  least  in 
part,  the  cause  of  the  almost  constant  premium  on  gold  coins. 
Whilst  the  relative  value  of  gold  to  silver  coins  is  lixed  at  the 
rate  of  15^  to  1 ;  that  of  gold  to  silver  bullion,  is  at  the  rate  of 
3.091  :  197,  nearly  equal  to  15.G9  :  1.  This  last  ratio  cannot 
essentially  differ  from  the  true  average  market  relative  price  of 
the  two  metals,  since  the  mint  has  been  abundantly  supplied 
with  both  for  the  last  forty-five  years. 

But  whether  we  estimate  that  relative  value,  by  deducing  it 
from  the  premium  on  tbe  French  gold  coins,  or  by  assuming 
that  of  gold  to  silver  bullion  as  purchased  by  the  French  mint, 
or  at  the  apparent  market  rate  in  England  during  the  three  or 
four  last  years,  which  would  give  respectively  the  ratios  of  about 
15.(),  15.7,  and  15.2.5  to  1 ;  it  is  evident  that  our  gold  coins  are 
underrated  at  least  4  per  cent.  The  necessary  consequence  is 
tiie  disappearance  of  gold  coins,  and  their  exportation  to  Eu- 
rope, whenever  the  exchange  will  admit  of  it.  According  to 
that  regulation,  a  ten  dollar  gold  coin,  or  Eagle,  contains  270 
grains  of  standard  gold ;  and  as  the  20  shillings  sterling  gold 
coin,  or  Sovereign,  contains  123^|i  grains  of  gold  of  the  same 
standard,  about  $4.56  in  gold  coin'of  the  United  States,  contain 
a  quantity  of  pure  gold  equal  to  that  contained  in  a  Sovereign. 
Allowing  1  per  cent,  for  charges  and  transportation,  our  gold 
coins  may  commence  to  be  exported  to  England  as  soon  as  the 
exchange  rises  to  $4.61  per  pound  sterling;  which  rate  corre- 
sponds with  nearly  3|  per  cent,  above  the  nominal,  and  3  per 
cent,  below  the  true  par.  calculating  this  at  the  ratio  of  near 
15.6  to  1,  or  $4.75  per  pound  sterling.  We  find  by  the  tables 
of  exchange  annexed  to  the  report  of  the  Secretary  of  the  Trea- 
sury, that,  with  (he  exception  of  the  year  of  the  embargo,  un- 
less incidentally  for  a  few  days,  the  exchange  on  London,  from 
1795  to  1821,  never  rose  to  84.62  per  pound  sterling,  or  about 

4  per  cent,  above  the  nominal  par;  or  in  other  words,  that  dur- 
ing the  whole  of  that  period,  the  exchange  was  constantly  fav- 
orable to  the  United  States,  having  never  been  higher,  with  the 
exception  aforesaid,  than  2  per  cent,  below  the  true  par.  This 
is  the  reason  why  our  gold  coins,  though  underrated,  were  not 
exported,  till  the  year  1821;  when  the  exchange  rose  from 
$4.60  to  84.98  per  pound  sterling ;  and  our  gold  coins  began  to 
be  exported,  a  premium  of  one-half  per  cent,  upon  them  being 
given,  when  the  premium  on  the  nominal  par  of  exchange  was 

5  per  cent,  corresponding  to  an  exchange  of  near  8^1.67  per 
pound  sterling.  From  that  time  to  the  end  of  the  year  1829,  the 
exchanges  have,  with  few  short  exceptions,  been  tmfavorable  to 
the  United  States;  and  the  exportation  has  continued,  not  oidy 
during  that  period,  l)ut  also  during  the  Last  nine  months,  though 


60  BANKS  AND  CURRENCY. 

the  exchange  has  this  year  been  but  little  if  any  above  the  true 
par.  It  is  perfectly  clear,  that,  whilst  our  gold  coins  are  thus 
underrated,  they  will  be  exported,  whenever  the  exchange 
rises  above  $4.61  to  $4.64  per  pound  sterling;  and  that,  if  rated 
according  to  the  true  or  approximate  relative  value  of  gold  to 
silver,  they  would  not  be  exported  to  England  till  the  exchange 
had  risen  to  at  least  $4.80  to  $4.83,  or  more  than  1  per  cent, 
above  the  true  par. 

If  the  intention  is  to  exclude  the  gold  coins  altogether,  it  is 
quite  unnecessary  to  coin  gold.  If  it  is  intended  that  they  should 
make  part  of  the  circulation,  they  must  be  rated  at  or  near  their 
true  relative  value.  Unless  this  is  done,  the  circulating  metallic 
never  can  be  sufficiently  enlarged  to  insure  to  the  country  a 
sound  currency.  The  question,  whether  the  two  metals  should 
circulate  simultaneously,  has  never  been  made  a  matter  of  doubt 
when  there  has  been  no  paper  currency.  Both  are  then  indis- 
pensable, gold  for  large  payments  and  principally  for  remittances 
and  travellers,  and  silver  for  small  daily  payments.  The  Secre- 
tary of  the  Treasury  correctly  states,  that,  "  if  there  were  no 
paper  medium  hke  that  of  the  Bank  of  the  United  States,  cir- 
culating freely  in  all  parts  of  the  Union,  and  everywhere  con- 
vertible into  the  standard,  at  a  very  moderate  discount,  gold 
coins  would  be  almost  indispensable.  Without  them,  every  trav- 
eller, even  from  state  to  state,  and  often  from  one  county  to 
another,  must  encumber  himself  with  silver,  or  be  exposed  to 
vexatious  embarrassments  and  impositions."  A  country  which 
wishes  to  make  gold  the  only  standard  of  value,  is  still  compelled 
to  admit  a  silver  coinage  for  small  payments.  Where  silver  is 
the  standard,  gold  would  still  be  found  necessary  unless  supplied 
by  paper.  It  is  true,  that  so  long  as  five  dollar  notes  exchange- 
able everywhere  for  specie  do  circulate,  gold,  though  rated  at 
its  value,  will  be  less  in  demand,  and  that  many  persons  will 
prefer  the  notes.  But  even  in  that  case,  both  may  at  least  be 
permitted  to  circulate  concurrently,  leaving  to  every  individual 
the  option  of  either.  At  all  events,  if  thus  rated,  they  would 
assist  in  filling  the  vaults  of  the  banks,  and  thereby  throw  a 
larger  quantity  of  silver  in  circulation. 

It  has  been  objected  to  the  simultaneous  circulation  of  the  two 
metals,  that  the  fluctuation  in  their  relative  price,  increases  the 
uncertainty  of  the  standard.  This  is  true,  but  not  to  the  extent 
which  a  first  view  of  the  subject  may  suggest,  and,  even  to  that 
extent,  producing  so  small  an  effect  that  it  may  be  altogether 
neglected. 

There  are  four  contingencies  which  may  cause  a  fluctuation 
in  the  relative  price  of  gold  and  silver,  as  either  may  either  rise 
or  fall,  as  compared  to  the  value  of  all  other  commodities. 
Supposing  a  country  where  silver  is  made  the  only  legal  tender, 
it  is  clear  that  in  two  of  those  contingencies,  namely,  if  the 


BANKS  AND  CURRENCY.  61 

price  of  gold  should  rise,  or  if  that  of  silver  should  fall,  every 
payment  would  have  still  been  made  in  silver,  if  both  metals 
had  been  a  legal  tender,  and  the  option  given  to  the  debtors  to 
pay  with  either.  As  the  probability  of  those  several  contingen- 
cies is  perfectly  equal,  it  follows  that,  in  one-half  of  the  fluctua- 
tions which  may  take  place  in  the  relative  price  of  the  two 
metals,  it  is  perfectly  immaterial,  whether  one  or  both  are  made 
a  legal  tender.  With  respect  to  the  two  other  contingencies ;  if 
the  price  of  silver  should  rise,  that  of  gold  remaining  the  same 
as  compared  to  all  other  commodities,  the  debtors  in  the  coun- 
try where  both  metals  were  a  legal  tender,  would  pay  in  gold, 
and  therefore  in  perfect  conformity  with  the  original  contract ; 
whilst,  in  the  country  where  silver  alone  was  a  legal  tender, 
they  would  be  obliged  to  pay  in  that  metal,  that  is  to  say,  to 
pay  a  greater  value  than  according  to  the  original  contract ; 
and,  on  the  other  hand,  if  the  price  of  gold  should  fall,  that  of 
silver,  as  compared  to  all  other  commodities,  remaining  the 
same,  the  debtors  would,  in  the  country  which  admitted  only 
silver  as  a  legal  tender,  be  obliged  to  pay  in  that  metal  in  con- 
formity with  the  contract ;  while  in  the  country  where  both 
metals  were  a  legal  tender,  the  debtors  would  pay  in  gold,  that 
is  to  say,  a  sum  less  than  according  to  the  contract.  Whatever 
may  be  the  amount  of  fluctuation,  the  stability  of  the  standard 
of  value  is  not,  by  adopting  only  one  metal  as  such,  improved 
to  a  greater  extent  than  has  now  been  stated.  But  the  fact  is, 
that  the  fluctuations  in  the  relative  price  of  gold  and  silver 
coins  are  so  small  in  a  country  where  the  mint  is  open  to  all 
individuals,  and  under  proper  regulations,  that,  when  compared 
with  the  variations  to  which  coins  issuing  from  the  same  mint 
are  liable,  they  may  be  altogether  disregarded. 

It  has  been  sometimes  erroneously  supposed,  that  governments 
might  alter  by  their  own  regulations  the  actual  relative  value 
of  the  two  precious  metals.  This  might  be  done  to  a  considera- 
ble extent,  if  these  had  no  intrinsic  value ;  that  is  to  say,  if  they 
could  be  obtained  without  capital  or  labor,  or  if,  whatever  the 
cost  of  production  might  be,  they  were  of  no  utility  whatever 
except  for  currency.  In  the  first  case,  governments  might  at- 
tach any  value  they  pleased  to  either  metal,  in  the  same  manner 
as  is  now  done  with  paper  money.  In  the  latter  case,  there 
being  no  other  demand  except  that  of  governments,  the  price 
of  either  metal  might  be  reduced  so  low,  as  to  compel  an  aban- 
donment of  all  the  poorer,  but  not  lower  than  the  cost  of  pro- 
duction at  the  most  fertile  mines.  But  the  intrinsic  value,  of 
the  precious  metals,  combined  with  the  general  demand  for 
them,  determines  their  market  price.  Governments  are  among 
the  principal,  but  not  the  only  consumers.  If  the  demand  for 
either  gold  or  silver  for  the  purpose  of  currency  was  to  cease 
altogether,  it  would  have  an  eifecf  on  the  market  pri(  e  of  the 


62  BANKS  AND  CURRENCY. 

metal  excluded ;  but  a  government,  which  uses  both  as  cur- 
rency, cannot  affect  their  permanent  relative  value.  It  may, 
however,  to  a  certain  extent,  prevent  great  fluctuations,  by 
coining  at  all  times  for  all  individuals  who  may  bring  in  bullion, 
allowing  always  the  same  regular  price,  and  paying  for  it  with- 
out delay,  and  without  any  other  charge  than  the  actual  cost 
of  coining. 

It  has  already  been  stated,  that  the  relative  mint  price  of 
gold  and  silver  bullion  in  France  (about  15.7:1)  is  very  near 
the  average  market  price  of  those  two  metals.  And  by  giving 
always  the  same  regular  price  for  each,  government  has,  to  a 
certain  degree,  prevented  any  great  fall  in  the  price  of  either. 
It  is  only  during  short  and  extraordinary  periods,  that  the  fluc- 
tuations have  been  so  great,  as  that  the  gold  coins  did,  either 
fall  to  the  par  of  silver  coins,  or  rise  to  a  premium  of  one  per 
cent.  During  by  far  the  greater  part  of  the  period  of  forty- 
five  years,  which  has  elapsed  since  that  regulation  took  place, 
this  premium  has  fluctuated  from  one-fifth  to  one-half  per  cent. ; 
so  that  the  variations  in  the  relative  price  of  the  two  metals 
have,  with  the  few  exceptions  above  mentioned,  been  less  than 
one-third  per  cent.  And  even  these  would  have  been  less,  had 
not,  as  has  already  been  stated,  the  silver  coins  been  overrated 
by  charging  about  one-half  per  cent,  too  much  on  their  coinage. 

It  is  believed  that  there  is  no  mint  which  issues  more  faithful 
and  perfect  coins  than  that  of  the  United  States.  The  ex- 
treme variation  from  standard  fineness,  as  determined  by  the 
annual  assay,  does  not  exceed  one-fifth  per  cent,  on  the  silver 
coins ;  on  the  gold  coins  it  is  too  small  to  be  appreciated.  On 
a  large  sum  as  delivered  from  the  mint,  the  weight,  if  not  pre- 
cisely accurate,  would  almost  uniformly  be  found  to  fail  in  ex- 
cess. But  trivial  deviations  in  weight  on  single  pieces  are  una- 
voidable :  they  rarely  exceed  one-third  per  cent,  on  the  hea- 
viest silver,  and  are  less  than  one-sixth  per  cent,  on  the  gold 
coins.  If,  to  those  unavoidable  deviations,  be  added  the  loss 
which  coins  experience  by  friction,  it  will  be  found  that  they 
exceed  in  value  the  fluctuations  in  the  relative  market  price 
of  the  gold  and  silver  coins  issued  under  proper  mint  regula- 
tions, and  therefore  that  these  are  a  quantity  which  may  be 
neglected,  and  which,  in  fact,  is  never  taken  into  consideration 
at  the  time  of  making  the  contract. 

The  importance  of  preserving  a  permanent  standard  of  value 
is  the  leading  principle,  which  we  have  tried  to  enforce  in  this 
paper ;  and  it  is  for  that  express  purpose  that  we  consider  an 
alteration  in  the  mint  regulations,  which  alone  can  bring  gold 
into  circulation,  as  absolutely  necessary.  The  rate  heretofore 
adopted  had  its  origin  in  a  mistake,  and  was  not  at  all  intended 
for  the  purpose  of  excluding  gold.  It  did  not  produce  that  effect 
for  thirty  years,  on  account  of  the  favorable  rate  of  exchanges. 


BANKS  AND  CURRENCY.  63 

To  persist  in  it,  now  that  experience  has  shown  the  evils  it  pro- 
duces, and  amongst  others  the  undeniable  exportation  of  gold, 
and  of  gold  coins,  at  a  time  when  the  exchanges  may  be  three 
per  cent,  under  the  true  par,  instead  of  being  adherence  to  the 
original  plan,  is  an  obvious  deviation  from  its  avowed  object. 
We  are  sacrificing  reality  to  a  pure  shadow,  when  for  the  sake 
of  an  abstraction,  and  in  order  to  avoid  a  contingent  and  doubt- 
ful fluctuation  of  one-half  per  cent,  in  (he  standard  of  value, 
we  promote,  by  the  total  exclusion  of  gold  from  circulation,  that 
increase  of  the  paper  currency,  which  alone  can  materially  en- 
danger that  standard. 

But  even  this  objection  may  be  removed  by  raising  the  mint 
price  of  gold  only  to  that  rate,  which  will  render  it  almost  im- 
possible that  its  legal  value  should  ever  be  higher  than  its  mar- 
ket price.  We  would,  therefore,  suggest  the  adoption,  in  the 
relative  legal  value  of  the  gold  and  silver  coins,  of  a  ratio  not 
much  above  that  of  15.6:1,  rather  than  one  nearer  to  the  aver- 
age relative  value  of  the  two  metals.  As  the  exchange  must 
rise  more  than  one  per  cent,  above  the  true  par  derived  from 
the  legal  relative  value  which  may  be  adopted,  before  Ameri- 
can gold  coins  can  be  exported,  this  would  not  take  place  to 
England,  until  the  exchange  had  risen  to  at  least  S4  81  per 
pound  sterling.  On  the  other  hand,  that  ratio  being  lower  than 
that  of  the  relative  value  of  gold  and  silver  bullion  either  in 
England  or  in  France,  there  would  be  no  danger  of  the  price 
of  the  gold  falling  below  that  of  the  silver  coins.  On  the  con- 
trary, it  is  extremely  probable,  that  the  gold  coins  would  gene- 
rally, as  in  France,  command  a  sm.all  premium,  and  be  used 
with  great  convenience  as  subsidiary  to  silver,  which  would  re- 
main as  heretofore  our  standard  of  value.  Either  of  the  ratios 
of  2700:173  (equal  to  about  15.6009:1),  and  of  125:8  (equal  to 
15.625:1)  would  answer  that  purpose.  According  to  the  first, 
the  weight  of  the  eagle  would  be  in  standard  gold,  259.5;  and 
according  to  the  second  259.2  grains.  The  last  ratio  is  the  most 
simple,  and  is  capable  of  a  (lefmite  expression  in  decimals.  The 
only  advantage  of  the  first,  the  expression  of  which,  though  less 
simple,  is  however  perfectly  definite,  consists  in  making  the  cor- 
responding value  of  the  pound  sterling  almost  equal  to  §4  75, 
(nearly  4.7505,)  which  would  adord  much  convenience  in  the 
calculations  of  duties  and  exchange.  The  corresponding  value 
of  the  pound  sterling,  according  to  the  second  ratio,  would  be 
near  $4  75.6.  We  think,  that  at  all  events,  the  ratio  should 
not  exceed  that  of  675:13,  (nearly  espial  to  15.7:1,)  which  would 
give  two  hundred  and  fifty-eight  grains  for  the  weight  of  the 
eagle  in  standard  gold,  and  about  $4  77.8  for  the  corresj)onding 
value  of  the  pound  sterling.* 

*  See  Note  A. 


64  BANKS  AND  CURRENCY. 

Another  consideration  may  be  adduced  in  favor  of  the  pro- 
posed reform  of  our  gold  coins.  It  seems  to  be  well  ascertained 
that  the  United  States  contain  one  of  the  most  extensive  deposits 
of  gold  that  has  yet  been  discovered.  It  extends  from  the  central 
parts  of  Virginia,  in  a  south-west  direction,  to  the  state  of  Ala- 
bama. It  is  said  to  have  yielded  the  value  of  near  half  a  mil- 
lion of  dollars  this  year,  and  it  is  not  improbable  that  it  will  ere 
long  aflbrd  an  annual  produce  of  several  millions.  It  appears 
but  just  to  aiford,  to  those  employed  in  collecting  that  natural 
product,  a  certain  and  the  highest  home  market  of  which  it  is 
susceptible.  This  cannot  be  the  case,  so  long  as  gold  is  only  a 
merchandise  for  exportation,  and  will  be  effected  by  making  it 
a  current  coin,  and  reducing  the  charge  of  coinage  in  the  man- 
ner which  has  been  before  suggested.  In  every  point  of  view, 
we  consider  this  last  measure,  that  of  enabling  the  mint  to  pay 
immediately  for  the  bullion,  and  of  substituting,  to  the  delay  of 
two  months,  a  small  duty  on  the  coinage  not  higher  than  its  cost, 
as  of  no» inconsiderable  importance. 

Great  Britain,  in  adopting  gold  as  the  sole  standard  of  value, 
has  found  it,  however,  absolutely  necessary  to  admit  silver  coins 
for  payments  not  exceeding  forty  shillings.  This  limitation 
would,  it  seems,  have  been  sufficient  for  the  object  intended. 
But,  whether  in  order  to  prevent  the  exportation,  or  only  the 
better  to  assert  the  adherence  to  an  abstract  principle,  the  new 
silver  coinage  has  been  overrated  about  nine  per  cent,  by  coin- 
ing the  troy  pound  weight  of  standard  silver  into  sixty-six  in» 
stead  of  sixty-two  shillings.  This  debased  coin  is  attended  with 
the  same  inconvenience  as  a  paper  currency  issued  by  govern- 
ment. There  is,  on  account  of  the  profit,  a  temptation  to  issue 
too  much ;  and  no  sure  means  can  be  found  of  ascertaining  the 
amount  wanted  for  effecting  the  payments  to  which  that  por^ 
tion  of  the  currency  is  applicable.  It  is  worthy  of  remark,  that 
England,  from  a  scrupjulous  adherence  to  a  single  standard,  should 
have  actually  established  two  distinct  standards  of  value,  one 
for  wholesale  and  the  other  for  retail  transactions.  It  is  obvi- 
ous, that  since  a  debased  coin  can  be  neither  profitably  exported 
nor  applied  to  other  purposes,  any  considerable  excess,  beyond 
what  is  actually  wanted  for  effecting  small  payments,  must  cause 
a  depreciation.  Should  government  be  ever  so  moderate  in  its 
issues,  the  facility  with  which  that  coin  may  be,  not  counter- 
feited, but  illegally  imitated  and  put  into  circulation,  must  ulti- 
mately defeat  the  object  intended.  In  the  meanwhile,  should 
the  excess  be  such,  that  the  retailers  of  every  description,  who 
are  obliged  to  take  in  payment  silver  inapplicable  to  wholesale 
purchases,  could  not  dispose  of  the  surplus,  they  must,  to  indem- 
nify themselves,  add  something  to  their  prices.  We  believe  this 
to  be  already  the  fact,  and  that  this,  like  every  other  depreci- 


BANKS  AND  CURRENCY.  65 

ated  currency,  operates  as  a  tax,  which  affects  principally  all 
those  who  are  compelled  to  purchase  every  thing  by  retail. 

These  two  measures,  suggested  for  the  purpose  of  enlarging 
the  circulating  metallic  currency,  recommend  themselves  by 
their  simplicity,  and  are  founded  on  the  beneficial  experience 
of  almost  every  other  country.  In  Europe,  England  alone  has 
resorted  to  a  single  standard,  and  that  nominally,  since  her  silver 
circulation  amounts  to  eight  millions  sterling,  or  to  more  than 
one- third  of  her  gold,  and  almost  to  one-third  of  her  paper  cur- 
rency. We  believe  that  small  notes,  or  tokens,  circulate  no 
longer  anywhere  but  in  Russia,  Sweden,  and  Scotland.  The 
situation  of  two  of  those  countries  is  in  nowise  parallel  to  that 
of  the  United  States.  Twenty  shilling  notes  continue  to  circu- 
late in  Scotland;  but  the  solidity  of  the  banking  system  of  that 
country  offers  an  anomaly  which  has  not  been  satisfactorily  ex- 
plained. The  numerous  failures  of  country  banks  in  England 
have  been  sometimes  ascribed  to  their  not  being  incorporated 
companies;  which  is  disproved  by  the  solidity  of  the  numerous 
Scotch  banks  of  the  same  description,  and  by  the  repeated  fail- 
\ires  of  our  own  chartered  banks ;  and  sometimes  to  their  not 
being  permitted  by  law  to  consist  of  a  sufficient  number  of  part- 
ners. But  of  the  twenty-nine  banks  of  Scotland  which  are  not 
chartered,  seventeen  are  voluntary  associations,  consisting  of 
from  three  to  nineteen  partners,  the  credit  of  which  is  as  good 
as  that  of  the  other  twelve  unincorporated,  and  of  the  three 
chartered  banks  of  that  country.  We  believe,  that  independent 
of  the  peculiarities  which  distinguish  the  Scotch  banking  sys- 
tem, its  superior  stability  must  be  principally  ascribed  to  the 
persevering  but  cautious  enterprise,  to  the  great  frugality,  and 
generally  to  the  habits  of  that  nation.* 

It  is  difficult  to  devise  the  more  direct  means  by  which  the 
over-issues  of  banks  may  be  checked.  Several  of  the  states  have 
as  yet  taken  no  measures  to  that  effect.  Many  appear  to  have 
tried  to  apply  rather  penal  than  preventive  remedies.  The  laws 
by  which  it  has  been  attempted  to  limit  either  the  loans  or  the 
issues  made  by  the  banks,  have  generally  been  intended  to  pre- 
vent what  never  can  take  place.  Amongst  more  than  three 
hundred  banks,  either  now  existing  or  which  have  failed,  and 
of  which  we  have  returns,  we  have  not  found  a  single  one,  the 
loans  of  which  amounted,  so  long  as  specie  payments  were  in 
force,  to  three  times,  or  the  issues  to  twice  the  amount  of  their 
capital.  It  is  clear,  that  provisions  applicable  to  such  improba- 
ble contingencies  are  purely  nominal.  The  statements  we  have 
given  show  that  the  average  amount  of  notes  issued  by  the 
state  banks  docs  not,  taken  together,  exceed  forty-four  per  cent, 
nor  the  aggregate  amount  of  their  notes  and  deposits,  eighty-one 

♦  See  Note  B. 
I 


66  BANKS  AND  CURRENCY. 

per  cent,  of  their  capital.     The  loans  made  by  those  banks,  of 
which  we  have  returns  in  that  respect,  amount  to  129,815,441, 
and  their  aggi  egate  capital  to  89,779,557  dollars.     Those  facts 
aflbrd  sufficient  data  to  form  an  opinion  of  the  necessary  pro- 
visions in  that  respect.     The  restrictions  can  only  be  made  in 
reference  to  the  capital  actually  paid  in,  and  to  apply  to  the 
amount  of  loans  and  issues,  which,  with  the  exception  of  de- 
posits, are  the  only  items  that  can  be  always  limited  by  the 
banks.    And  the  deposits,  independent  of  being  voluntary,  could 
not  without  much  inconvenience,  both  to  the  banks  and  their 
customers,  be  restricted  to  a  fixed  amount.     We  think  that  no 
bank  should  be  permitted  to  extend  its  loans,  including  stocks 
of  every  description,  and  every  species  of  debt  in  whatever 
manner  secured,  beyond  twice  the  amount  of  its  capital.     We 
find  provisions  to  that  effect  in  the  laws  of  Massachusetts  and 
Louisiana.    That  proportion  is  forty  per  cent,  greater  than  that 
of  the  banks  above  mentioned,  and  greater,  as  we  think,  than 
is  consistent  with  the  safety  of  almost  any  bank.     The  aggre- 
gate of  the  loans  made  and  of  the  stocks  owned  by  the  former 
Bank  of  the  United  States,  never  amounted  to  seventy  per 
cent.,  nor  that  of  the  existing  bank  to  fifty  per  cent,  beyond 
the  amount  of  their  respective  capitals.    This  restriction  alone 
necessarily  checks  the  aggregate  amount  of  the  issues  and  de- 
posits of  a  bank ;  which,  in  that  case,  never  can  together  ex- 
ceed the  amount  of  its  capital,  beyond  the  specie  in  its  vaults, 
and  the  nominal  value  of  its  real  estate.     But  we  believe  that 
a  positive  restriction  on  the  issue  of  notes,  so  that  they  never 
should  exceed  two-thirds  of  the  capital,  would  be  highly  bene- 
ficial.    The  only  objection  is,  with  respect  to  country  banks, 
which  have  not  the  same  proportionate  amount  of  deposits  as 
the  city  banks,  and  may  on  that  account  claim  a  greater  latitude 
with  respect  to  notes.  But  it  will  be  perceived  by  the  following 
statement,  which  includes  thirty  banks  of  the  state  of  New- York 
that  have  more  than  three-fourths  of  the  whole  banking  capital 
of  the  state,  and  all  the  chartered  banks  of  Pennsylvania  and 
Massachusetts,  that,  taking  into  consideration  both  notes  and  de- 
posits, the  proportion  of  these  to  the  capital  is  far  greater  in  the 
country  than  in  the  city  banks.     The  relative  proportions  are, 
in  New- York  and  in  Pennsylvania  as  seven  to  four,  and  in  Mas- 
sachusetts as  three  to  two.  A  reduction  in  the  amount  of  notes 
to  two-thirds  of  that  of  the  capital  would  not  afifect  this  state, 
and  would  still  leave  in  Pennsylvania  and  New-York,  the  pro- 
portion of  notes  and  deposits  to  capital,  much  greater  in  the 
country,  than  in  the  city  banks.     The  circulation  of  these  is,  in 
both  states,  less  than  their  capital.     The  restriction  proposed 
would  still  leave  the  circulation  of  the  country  banks,  in  Penn- 
sylvania, of  4,2.35,000  on  a  capital  of  3,506,000  dollars,  and  in 
New-York  of  6,737,000  on  a  capital  of  4,926,000  dollars. 


BANKS  AND  CURRENCY.  67 


Massachusetts, 

Specie,     -     - 
Capital,    -     - 

City. 

$    747,684     -     -     . 
13,450,000     -     -     . 

Cotintry. 

■  -  $  239,526 
.     -       5,702,400 

Notes,       -     - 
Deposits,  -     - 

2,357,678     -     -     • 
2,202,092     -     -     . 

.  -  2,160,000 
.     -          658,190 

Circulation,   - 

4,559,770     -     -     . 

.     -       2,818,190 

Pennsylvania, 
Specie,     -     - 
Capital,    -    - 

$1,639,134     -     -     . 
9,903,930     -     -     . 

.  .  $  775,537 
.     -       3,506,403 

Notes,      -    - 
Deposits,  -     - 

3,648,719     -     -     . 
5,046,183     -     -     . 

.  -  3,659,650 
.     -        1,795,266 

Circulation,  - 

8,694,902     -     -     - 

.     -        5,454,916 

New-York, 

Specie,     -    - 
Capital,    -     - 

$1,169,581     -     -     . 
10,711,200     -     -     . 

.  -  $  390,710 
.     -        4,926,153 

Notes,       -    - 
Deposits,  -     - 

3,394,257     -     -     • 
6,662,174     -     -     - 

.  -  4,567,023 
.     -        3,692,326 

Circulation,  - 

10,056,431     -     -     - 

.     -        8,259,349 

We  do  not  wish,  by  the  preceding  observations,  to  be  under- 
stood as  objecting  generally  to  the  extension  of  the  banking 
system  to  the  country,  but  only  to  the  indiscriminate  establish- 
ment of  banks,  without  regard  to  the  actual  wants  and  means 
of  the  districts  which  may  apply  for  that  purpose.  There  is  a 
general  spirit  of  enterprise  in  the  United  States,  to  which  they 
are  greatly  indebted  for  their  rapid  growth  ;  and  it  is  difficult 
to  ascertain,  in  all  cases,  to  what  extent  it  should  be  encouraged, 
and  when  it  ought  to  be  checked.  The  remarks  apply  particu- 
larly to  the  newly  settled  parts  of  the  country,  which  present  a 
state  of  things,  different  from  that  found  in  any  other  part  of  the 
civilized  world,  and  to  which,  therefore,  even  the  most  generally 
admitted  principles  of  political  economy  will  not  always  apply. 

Amongst  the  tirst-  emigrants,  there  are  but  few  possessed  of 
much  capital ;  and  these,  generally  employing  it  in  the  purchase 
of  land,  are  soon  left  without  any  active  resources.  The  great 
mass  bring  nothing  with  them,  but  their  industry,  and  a  small 
stock  of  cattle  and  horses.  A  considerable  portion  of  the  annual 
labor  is  employed  in  clearing,  inclosing,  and  preparing  the  land 
for  cultivation.  Those  difficulties,  and  all  the  privations  incident 
to  their  new  situation,  are  encountered  with  unparalleled  spirit 
and  perseverance.  Within  a  very  short  time,  our  numerous  new 
settlements,  which  in  a  few  years  have  extended  from  Ibc  Mo- 
hawk to  the  great  western  lakes,  and  from  tbe  Alleghany  to  the 


68  BANKS  AND  CURRENCY. 

Mississippi  and  beyond  it,  aflford  the  spectacle  of  a  large  popu- 
lation, with  the  knowledge,  the  intelligence  and  the  habits  which 
belong  to  civilized  life,  amply  supplied  with  the  means  of  sub- 
sistence, but  without  any  other  active  capital,  but  agricultural 
products,  for  which,  in  many  instances,  they  have  no  market. 
It  is  in  this  last  respect,  that  their  situation  essentially  differs 
from  that  of  any  other  country  as  far  advanced  in  civilization. 
We  might  even  add,  that  there  is,  in  several  ancient  settlements 
of  the  United  States,  a  less  amount  of  active  capital,  than  in  the 
interior  parts  of  many  European  countries.  The  national  indus- 
try, out  of  the  seaports,  has,  at  least  till  very  lately,  been  exclu- 
sively applied  to  agriculture ;  and  circulating  capital  will  rarely 
be  created,  out  of  commercial  cities,  without  the  assistance  of 
manufactures. 

With  the  greatest  abundance  of  provisions,  it  is  impossible 
for  a  new  country  to  purchase  what  it  does  not  produce,  unless 
it  has  a  market  for  its  own  products.  Specie  is  a  foreign  product, 
and,  though  one  of  the  most  necessary,  is  not  yet  always  that 
which  is  most  imperatively  required.  We  may  aver  from  our 
own  knowledge,  that  the  western  counties  of  Pennsylvania  had 
not,  during  more  than  twenty  years  after  their  first  settlement, 
the  specie  necessary  for  their  own  internal  trade  and  usual 
transactions.  The  want  of  communications,  and  the  great  bulk 
of  their  usual  products,  reduced  their  exports  to  a  most  incon- 
siderable amount.  The  two  indispensable  articles  of  iion  and 
salt,  and  a  few  others  almost  equally  necessary,  consumed  all 
their  resources.  The  principle,  almost  universally  true,  that 
each  country  will  be  naturally  supplied  with  the  precious  metals 
according  to  its  wants,  did  not  apply  to  their  situation.  House- 
hold manufactures  supplied  the  inhabitants  with  their  ordinary 
clothing,  and  the  internal  trade  and  exchanges  were  almost  ex- 
clusively carried  on  by  barter.  This  effectually  checked  any 
advance  even  in  the  most  necessary  manufactures.  Every  spe- 
cies of  business  required  the  utmost  caution,  as  any  failure  in 
the  performance  of  engagements  in  the  way  of  barter,  became, 
under  the  general  law  of  the  land,  an  obligation  to  pay  money, 
and  might  involve  the  party  in  complete  ruin.  Under  (hose 
circumstances,  even  a  paper  currency,  kept  within  pioper 
bounds,  might  have  proved  useful.  We  know  the  great  diffi- 
culties which  were  encountered  by  those  who  first  attempted  to 
establish  the  most  necessary  manufactures,  and  that  they  would 
have  been  essentially  relieved,  and  some  of  them  saved  from 
ruin,  by  moderate  bank  loans.  Yet  there  were  instances  where 
those  difficulties  were  overcome,  and  the  most  successful  manu- 
factures of  iron  and  glass  were  established  and  prospered  prior 
to  the  establishment  of  any  bank :  but  the  general  progress  of 
the  country  was  extremely  slow,  and  might  have  been  hastened 
by  such  institutions  soberly  administered.     It  is  obvious  that  in 


BANKS  AND  CURRENCY.  69 

this  and  other  similar  cases,  where  there  is  an  actual  want  of 
capital,  tiiis  should,  in  order  to  insure  success,  be  obtained  from, 
the  more  wealthy  parts  of  the  country,  cither  by  subscriptions 
to  local  banks,  or  by  the  estabUshment  of  branches  of  the  city 
banks. 

Some  of  the  first  settlements  in  other  parts  of  the  country, 
were,  for  a  length  of  time,  in  a  similar  situation.  The  progress 
of  others,  under  more  favorable  circumstances,  has  been  much 
more  rapid.  The  western  parts  of  the  state  of  New- York  havC' 
always  enjoyed  a  nearer  and  more  accessible  market.  The  ac- 
quisition of  Louisiana,  the  invention  of  steam-boats,  and  the  im- 
proved communications  by  land  and  water,  have  entirely  changed 
the  state  of  things  west  of  the  Alleghany  mountains.  Still,  and 
notwithstanding  the  unparalleled  increase  of  population,  and  the 
rapid  progress  in  every  respect  of  the  new  states  or  settlements, 
their  wealth  does  not,  in  any  degree,  correspond,  either  with 
that  population,  or  with  their  advances  in  agriculture.  All  new 
colonies,  either  from  Europe  to  America,  or  from  the  ancient 
settlements  to  the  more  interior  part  of  America,  have,  under 
different  modifications,  been  ever  placed  in  a  similar  situation. 
To  this  must  be  ascribed  the  issues  of  paper  money  l)y  the  seve- 
ral states,  whilst  imder  the  colonial  government.  This  currency, 
in  many  instances  useful,  was,  as  usual,  often  cariicd  to  excess, 
and  depreciated  accordingly.  The  same  causes  continue  to  pro- 
duce similar  effects.  The  eagerness  for  country  banks  is  natural, 
but  often  mistakes  its  object.  They  may  be  safely  established 
in  flourishing  towns  or  villages,  either  commercial  or  manufac- 
turing, provided  their  issues  are  restrained  within  proper  bounds. 
It  is  to  the  abuse,  and  not  to  the  use,  that  we  object.  The  profits 
of  agriculture  are  so  moderate,  at  least  in  the  middle  states,  and 
the  returns  so  slow,  that  even  loans  on  mortgages  are  rarely  use- 
ful. But  when  made  by  banks,  on  notes  at  sixty  days,  without 
any  other  substantial  security  than  real  estate,  they  never  can 
be  relied  on  as  an  immediate  resource,  and,  when  payment  is 
urged,  they  almost  always  prove  ruinous  to  the  borrowers,  and 
are  often  attended  with  heavy  losses  to  the  banks.  The  example 
of  Pennsylvania  has  clearly  shown,  that  the  calamities  inflicted 
by  the  failures  of  country  banks,  established  in  unfit  places,  or 
for  want  of  experience,  improperly  administered,  have  been  still 
more  fatal  to  the  inhabitants  of  the  districts  in  which  they  were 
situated,  than  to  the  state  at  large.  It  is  well  known  that  the 
same  observation  apj)li<^,  with  equal,  if  not  greater  force,  ta 
other  states  than  Pennsylvania. 

The  revised  statutes  of  the  state  of  New- York,  besides  several 
salutary  provisions  for  the  bona  fide  payment  of  the  stock  sub- 
scribed, to  prevent  any  dividend  greater  than  the  actual  profits, 
and  generally  for  the  prevention  of  frauds,  contain  one  of  pri- 
mary importance,  adopted  also  in  Maryland  and  some  other 


70  BA.\KS  AND  CURRENCY. 

states,  by  which  the  charter  is  forfeited,  whenever  the  bank  re- 
fuses or  declines  to  pay  on  demand,  its  notes  or  deposits  in  specie. 
But  the  restriction  on  loans  and  discounts,  which  limits  their 
amount  to  three  times  that  of  the  capital,  is  purely  nominal ;  and 
the  responsibility  imposed  on  stockholders,  though  already  adopt- 
ed in  some  other  states,  has  been  considered  as  objectionable.  As 
a  substitute,  and  with  a  laudable  intent  to  protect  the  community 
against  partial  failures,  a  "  safety  fund"  has  since  been  establish- 
ed by  law,  consisting  of  a  tax  of  one-half  per  cent,  on  the  capital 
of  every  bank,  and  which  is  applicable  to  the  payment  of  the 
notes  of  any  that  may  fail.  This  must  have  a  tendency  to  en- 
courage excessive  issues  of  paper,  which  could  not  be  sustained 
if  resting  only  on  the  credit  of  the  bank  by  which  they  are  made. 
But,  unacquainted  as  we  are  with  the  reasons  alleged  in  favor 
of  that  measure,  it  appears  to  us  unjust;  1st,  by  making  insti- 
tutions properly  managed,  responsible  for  the  conduct  of  others 
at  a  great  distance,  and  over  which  they  have  no  control ;  2d, 
because,  on  account  of  the  disproportion  between  the  aggregate 
of  the  circulation  and  deposits  of  the  city  and  country  banks  re- 
spectively, the  first  are  made  to  pay,  in  the  safety  fund,  about 
twice  as  much  in  proportion  as  the  country  banks.  This  will 
appear  evident  by  referring  to  the  last  statement,  and  does  not 
accord  with  the  principles  of  a  government  founded  on  the  equal- 
rights  of  all.* 

One  of  the  most  efficient  securities  afforded  by  the  state  laws 
against  improvident  issues  of  notes,  is  to  be  found  in  that  of  Mas- 
sachusetts, by  which  banks  are  obliged  to  pay  interest  at  the 
rate  of  24  per  cent,  a  year,  on  all  notes  or  deposits  which  they 
may  neglect  or  refuse  to  pay  in  specie  on  demand.  A  similar 
provision,  but  at  the  rate  of  12  per  cent.,  has  been  enacted  by 
the  state  of  Louisiana,  and  is  also  inserted  in  the  charter  of  the 
Bank  of  the  United  States.  Another  great  guarantee  against 
improper  management,  is  the  obligation  to  make  and  publish 
annual  statements  of  the  situation  of  the  banks.  The  mystery 
with  which  it  was  formerly  thought  necessary  to  conceal  the 
operations  of  those  institutions,  has  been  one  of  the  most  prolific 
causes  of  erroneous  opinions  on  that  subject,  and  of  mismanage- 
ment on  their  part.  It  is  highly  desirable  that  this  measure 
should  be  adopted  in  the  states  where  those  returns  are  not  yet 
made  obligatory.  The  annual  statements  of  the  Bank  of  the 
United  States,  and  of  the  banks  of  all  the  New-England  states, 
of  Pennsylvania,  Virginia,  Georgia,  and  others,  to  Congress, 
and  to  the  states  respectively,  have  in*o  instance  injured  any 
institution  that  was  properly  administered.  Publicity  is,  in  raost 
cases,  one  of  the  best  checks  which  can  be  devised :  it  inspires 

•  See  Note  C. 


BANKS  AND  CURRENCY.  71 

confidence,  and  strengthens  credit;  whilst  concealment  begets 
distrust,  and  often  engenders  unjust  suspicions. 

There  is  still  another  measure,  better  calculated  perhaps 
than  any  other,  to  give  complete  security  against  the  danger  of 
insolvency.  It  has  been  already  observed,  that  the  original 
capital  of  the  Bank  of  England,  amounting  to  more  than  four- 
teen millions  sterling,  has  been  loaned  to  government,  and,  re- 
maining in  its  hands,  affords  the  best  security  to  the  holders  of 
notes  and  to  depositors.  The  propriety  of  extending  a  similar 
provision  to  country  banks  h^ts  been  strongly  urged  in  England  ; 
and  the  same  measure,  with  respect  to  our  banks,  generally, 
has  also  been  suggested.  It  is  quite  practicable,  and  seems  un- 
objectionable in  a  country  possessed  of  so  large  a  capital  as  Eng- 
land, and  where  the  large  amount  of  public  debt  would  enable 
the  banks  to  comply  with  the  condition  without  any  difficulty. 
But  this  might  not  be  practicable  here,  where  the  banking 
capital  is  much  larger  than  the  amount  of  all  other  public 
stocks,  and  we  apprehend  that  mortgages  on  real  estate  must, 
if  such  provision  becomes  general,  be  resorted  to  for  want  of 
such  stocks.  We  must  also  refer  to  our  former  observations 
respecting  the  nature  of  our  banking  capital.  Should  this  be 
permanently  vested  in  mortgages  or  stocks,  the  accommodations 
which  the  banks  afford  to  individuals  might  be  too  much  cur- 
tailed. If  these  objections  can  be  removed,  the  plan  proposed 
would  give  to  the  banking  system  of  the  United  States  a  so- 
lidity, and  inspire  a  confidence,  which  it  cannot  othei'wise  pos- 
sess. 


The  constitutional  powers  of  Congress  on  the  subject,  are  the 
next  and  principal  object  of  inquiry. 

We  have  already  adverted  to  the  provisions  of  the  Constitu- 
tion, which  declare,  th'^it  no  state  shall  either  coin  money,  emit 
bills  of  credit,  make  any  thing  but  gold  and  silver  coins  a  ten- 
der in  payment  of  debts,  or  pass  any  law  impairing  the  obliga- 
tion of  contracts,  and  which  vest  in  Congress  the  exclusive  power 
to  coin  money,  and  to  regulate  the  value  thereof,  and  of  foreign 
coin.  It  was  obviously  the  object  of  the  Constitution  to  consoli- 
date the  United  States  into  one  nation,  so  far  as  regarded  all 
their  relations  with  foreign  countries,  and  that  the  internal 
powers  of  the  general  government  should  be  applied  only  to  ob- 
jects necessary  for  that  purpose,  or  to  those  few  which  were 
deemed  essential  to  the  prosperity  of  the  country,  and  to  the 
general  convenience  of  the  people  of  the  several  states.  Amongst 
the  objects  thus  selected,  were  the  power  to  regulate  commerce 
among  the  several  states,  and  the  control  over  tjie  monetary 
system  of  the  country. 


72  BANKS  AND  CURRENCY. 

This  last-mentioned  power  is,  and  has  ever  been,  one  of  pri- 
mary importance.  It  is  for  want  of  such  general  power,  that 
Germany  has  always  been  inundated  with  coins  often  debased, 
and  varying  from  state  to  state  in  standard  and  denomination : 
the  same  defect  was  found  in  the  former  United  Provinces  of 
the  Netherlands:  and  the  banks  of  deposit  of  Hamburg  and 
Amsterdam,  were  originally  established  for  the  purpose  of  cor- 
recting that  evil.  Even  under  the  articles  of  confederation, 
Congress  had  already  the  sole  and  exclusive  right  and  power  of 
regulating  the  alloy  and  value  of  coins  struck  by  their  own  au- 
thority, or  by  that  of  the  respective  states.  It  was  on  a  most 
deliberate  view  of  the  subject,  that  the  same  powers  were  con- 
firmed and  enlarged  by  the  Constitution,  and  the  individual 
states  excluded  from  any  participation,  which  might  interfere 
with  the  controlling  power  of  the  general  government.  With 
the  exception  of  those  which  are  connected  with  the  foreign  re- 
lations of  the  United  States,  either  in  war  or  in  peace,  there  are 
no  powers  more  expressly  and  exclusively  vested  in  Congress,  of 
a  less  disputable  nature,  or  of  greater  general  utility,  than  those 
on  the  subject  of  currency.  Arbitrary  governments  have,  at 
various  times,  in  order  to  defraud  their  creditors,  debased  the 
coin,  whilst  they  preserved  its  denomination,  and  thus  subverted 
the  standard  of  value  by  which  the  payment  of  pubUc  and  pri- 
vate debts,  and  the  performance  of  contracts,  ought  to  have 
been  regulated.  This  flagrant  mode  of  violating  public  faith 
has  been  long  proscribed  by  public  opinion.  Governments  have, 
in  modern  times,  substituted  for  the  same  purpose  issues  of  paper 
money,  gradually  increasing  in  amount,  and  decreasing  in  value. 
It  was  to  guard  against  those  evils,  that  the  provisions  in  the 
Constitution  on  that  subject  were  intended :  and  it  is  the  duty, 
not  less  than  the  right,  of  the  United  States,  to  carry  them  into 
effect. 

The  first  paragraph  of  the  eighth  section  of  the  first  article, 
provides  that  Congress  shall  have  power  "  to  lay  and  collect 
taxes,  duties,  imposts,  and  excises,  to  pay  the  debts  and  provide 
for  the  common  defence  and  general  welfare  of  the  United 
States ;  but  all  duties,  imposts,  and  excises,  shall  be  uniform 
throughout  the  United  States." 

It  has  sometimes  been  vaguely  asserted,  though,  as  we  be- 
lieve, never  seriously  contended,  that  the  words  "  to  provide  for 
the  common  defence  and  general  welfare,"  were  intended,  and 
might  be  construed,  as  a  distinct  and  specific  power  given  to 
Congress,  or,  in  other  words,  that  that  body  was  thereby  in- 
vested with  a  sweeping  power,  to  embrace  within  its  jurisdic- 
tion any  object  whatever,  which  it  might  deem  conducive  to 
the  general  welfare  of  the  United  States.  This  doctrine  is  ob- 
viously untenable,  subversive  of  every  barrier  in  the  Constitu- 
tion which  guards  the  rights  of  the  states  or  of  the  people,  ex- 


BA?JKS  AND  CURRENCY.  73 

pfes^ly  contradicted  by  the  tenth  amendment,  which  provides, 
that  the  powers  not  delegated  to  the  United  States  by  the  Con- 
stitution, nor  prohibited  by  it  to  the  states,  are  reserved  to  the 
states  respectively,  or  to  the  people ;  and  tantamotmt  to  an  as- 
sertioti,  that  there  is  no  Constitution,  and  that  Congress  is  om- 
nipotent. Mr.  Jetierson  stigmatizes  this  construction  as  <'  a 
grammatical  quibble,  which  has  countenanced  the  general  gov- 
ernment in  a  claim  of  universal  power.  For,  (he  adds,)  in  the 
phrase,  to  lay  taxes,  to  pay  the  debts  and  provide  for  tJie  gejierat 
Tt-elfare,  it  is  a  mere  question  of  syntax,  whether  the  two  last 
infinitives  are  governed  by  the  first,  or  are  distinct  and  co-ordi- 
nate powers;  a  question  unequivocally  decided  by  the  exact 
definition  of  powers,  immediately  following." 

The  words  "  to  provide  for  the  common  defence  and  general 
welfare  of  the  United  States,"  are  as  obligatory  as  any  other 
part  of  the  Constitution ;  they  cannot  be  expunged,  and  must 
be  so  construed  as  to  be  etfective.  Mr.  Jetlcrsoii  did  not  deny 
this,  which  is  indeed  undeniable,'  and  he  only  contended,  that 
the  words  did  not  convey  a  distinct  power,  but  were  governed 
by  the  preceding  infinitive ;  that  is  to  say,  that  this  clause  in  the 
Constitution,  instead  of  giving  to  Congress  the  three  distinct  pow^ 
ers,  1st,  to  lay  taxes,  &c.,  2dly  to  pay  the  debts,  3dly  to  provide 
for  the  common  defence  and  general  welfare  of  the  United 
States,  gave  only  that  "  to  lay  and  collect  taxes,  duties,  imposts, 
and  excises,  in  order  to  pay  the  debts  and  provide  for  the  com- 
mon defence  and  general  welfare  of  the  United  States."  He 
states  the  question  as  one  of  syntax,  susceptible  of  only  two  con* 
structions;  one  which  would  give,  as  a  distinct,  a  sweeping  power 
inconsistent  with  the  spirit  and  other  eJrpress  provisions  of  the 
Constitution,  and  which  he  accordingly  rejects;  the  other,  which 
he  adopts,  and  which  admits,  but  confines  the  application  of  the 
words  "  to  provide  for  the  general  welfare,"  to  the  only  power 
given  by  that  clause,  viz.  that  of  laying  taxes,  duties,  &c. 

This  appears  to  have  been  the  construction  universally  given 
to  that  clause  of  the  Constitution,  by  its  framers  and  contempo-' 
raneous  expounders.  Mr.  Hamilton,  though  widely  dilfering  in 
another  respect  from  Mr.  Jefferson  in  his  construction  of  this 
clause,  agrees  with  him  in  limiting  the  application  of  the  words 
'*  to  provide  for  the  general  welfare,"  to  the  express  power  given 
by  the  first  sentence  a(  the  clause.  In  his  report  on  manufac* 
lures,  he  contends  for  the  power  of  Congress  to  allow  bounties 
for  their  encouragement,  and,  after  having  stated  the  three 
qualifications  of  the  power  to  lay  taxes,  viz.  1st,  that  duties,  im- 
posts, and  excLse-s,  should  be  unifbrm  throughout  the  United 
States;  2nd,  that  no  direct  tax  should  be  laid  unless  in  propor- 
tion to  the  census;  ."id,  that  no  duty  should  be  laid  on  exports; 
he  argues  on  the  constitutional  question  in  the  following  words : 


74  BANKS  AND  CURRENCY. 

"  These  three  qualifications  excepted,  the  power  to  raise  money  is  plenary  and 
indefinite ;  and  the  objects  to  which  it  may  be  appropriated,  are  no  less  compre- 
hensive than  the  payment  of  the  public  debts  and  the  providing  for  the  common 
defence  and  general  welfare.  TJie  terms  'general  welfare,'  were  doubtless  in- 
tended to  signify  more  than  was  expressed  or  imported  in  those  which  preceded ; 
otherwise  numerous  exigencies,  incident  to  tlie  affairs  of  a  nation,  would  have 
been  left  without  a  provision.  The  phrase  is  as  comprehensive  as  any  that  could 
have  been  used ;  because  it  was  not  fit  that  the  constitutional  authority  of  the 
Union  to  appropriate  its  revenues,  should  have  been  restricted  within  narrower 
limits  than  tlie  '  general  welfare  ;'  and  because  this  necessarily  embraces  a  vast 
variety  of  particulars,  which  are  susceptible  neither  of  specification  nor  of  defi- 
nition." 

"  It  is  therefore  of  necessity  left  to  the  discretion  of  the  national  legislature, 
to  pronounce  upon  the  objects  which  concern  the  general  welfare,  and  for  which, 
imder  that  description,  an  appropriation  of  money  is  requisite  and  proper.  And 
there  seems  to  be  no  room  for  a  doubt,  that  whatever  concerns  the  general  inter- 
ests of  learning,  of  agriculture,  of  manufactures,  and  of  commerce,  are  within 
tlie  sphere  of  the  national  councils,  as  far  as  regards  an  application  of  money. 

"  The  only  qualification  of  the  generality  of  the  phrase  in  question,  which  seems 
to  be  admissible,  is  this ;  that  the  object  to  which  an  appropriation  of  money  is 
to  be  made,  be  general  and  not  local ;  its  operation  extending,  in  fact^  or  by  pos- 
sibility, throughout  the  Union,  and  not  being  confined  to  a  particular  spot." 

"  No  objection  ought  to  arise  to  this  construction,  from  the  supposition  that  it 
would  imply  a  power  to  do  whatever  else  should  appear  to  Congress  conducive  to 
the  general  welfare.  A  power  to  appropriate  money  with  this  latitude,  which  is 
granted  too,  in  express  terms,  would  not  carry  a  power  to  any  other  thing  not 
authorized  in  the  Constitution,  either  expressly  or  by  fair  implication." 

Mr.  Hamilton  insisted  that  the  power  to  lay  and  collect  taxes 
and  duties,  implied  that  of  appropriating  the  money  thus  raised,, 
to  any  object  which  Congress  might  deem  conducive  to  '*  the 
general  welfare."  But  he  confines  throughout  the  application 
of  those  words  to  the  power  given,  as  he  understood  it,  by  the 
first  sentence  of  the  clause.  Mr.  Jefferson,  who  agreed  with 
him  in  that  respect,  denied  altogether  that  the  power  to  lay 
taxes  implied  that  of  applying  the  money  thus  raised  to  objects 
conducive  to  the  general  welfare.  It  cannot  be  objected  to  this 
construction,  which  is  the  most  literal,  that  the  words  "  for  the 
general  welfare"  are  thereby  rendered  of  no  effect.  For  there 
are  several  cases,  in  which  the  laying  a  tax  or  duty  does  alone 
effect  the  object  in  view,  without  the  aid  of  an  appropriation 
or  of  any  other  distinct  act  of  the  legislature.  On  that  point, 
however,  and  on  that  alone,  they  differed.  But  it  is  foreign  to 
the  object  now  under  consideration,  and  we  do  not  mean  to  dis- 
cuss it.  All  that  is  necessary  for  us  is,  that,  as  admitted  by  both, 
the  power  to  lay  duties  and  taxes,  is  vested  in  Congress,  and  may 
be  exercised,  to  provide  (or,  in  order  to  provide)  for  the  general 
welfare  of  the  United  States,  without  any  other  limitation  than 
the  three  qualifications  specified  by  the  Constitution,  and  above 
stated. 

It  has  indeed  been  lately  contended  by  some  distinguished 
citij^ens,  that  the  words  "general  welfare,"  referred  only  to  the 
powers  expressly  vested  in  Congress  by  the  Constitution:  or,  in 
other  words,  that  the  power  to  lay  duties  and  taxes  could  not  be 
exercised  but  for  the  purpose  of  carrying  into  effect  some  of 


BANKS  AND  CURRENCY.  75 

those  specific  powers.  It  seems  to  us,  that  this,  if  intended, 
"would  have  been  distinctly  expressed,  instead  of  using  the  words 
**  general  welfare."  And  although  it  is  undeniable,  that  a  con- 
structive power  cannot  be  legitimately  claimed,  unless  neces- 
sary and  proper  for  carrying  into  execution,  or  fairly  implied 
in,  a  power  expressly  delegated;  we  do  not  perceive  why  it 
should  be  necessary,  in  order  to  justify  the  exercise  of  a  power 
expressly  given,  that  it  should  be  exercised  in  reference  to  an- 
other similar  power.  But  we  do  not  mean  to  discuss  this  ques- 
tion, which  is  also  foreign  to  our  object.  Allowing,  for  the  sake 
of  argument,  the  validity  of  the  objection,  it  does  not  apply  to 
cases  where  the  object,  in  reference  to  which  the  duty  or  tax  is 
laid,  is  clearly  embraced  within  the  powers  of  the  general  gov- 
ernment. Although,  because  the  power  to  protect  manufactures 
is  not  expressly  vested  in  Congress,  that  to  lay  taxes  in  order  to 
effect  that  object  should  be  denied,  the  power  of  laying  a  tax 
or  duty,  for  the  purpose  of  carrying  into  etTect  an  express  pro- 
vision of  the  Constitution,  would  still  be  undeniable. 

Congress  has  the  power  to  lay  stamp  duties  on  notes,  on  bank 
notes,  and  on  any  description  of  bank  notes.  That  power  has 
already  been  exercised ;  and  the  duties  may  be  laid  to  such  an 
amount,  and  in  such  a  manner,  as  may  be  necessary  to  ellcct  the 
object  intended.  This  object  is  not  merely  to  provide  generally 
for  the  general  welfare,  but  to  carry  into  effect,  in  conformity 
with  the  last  paragraph  of  the  eighth  section  of  the  first  article, 
those  several  and  express  provisions  of  the  Constitution,  which 
vest  in  Congress  exclusively  the  control  over  the  monetary  sys- 
tem of  the  United  States,  and  more  particularly  those  which 
imply  the  necessity  of  a  uniform  currency.  The  exercise  of  the 
power  for  that  object  is  free  of  any  constitutional  objection,  pro- 
vided the  duties  thus  laid  shall  be  uniform,  and  applied  to  the 
Bank  of  the  United  States  as  well  as  to  the  state  banks.  The  act 
of  laying  and  collecting  the  duties,  which  is  expressly  granted, 
is  alone  sufticient  to  effect  the  object.  As  no  appropriation  of 
money  is  wanted  for  that  purpose,  the  exercise  of  power  which 
is  required,  is  purely  that  of  laying  duties;  and  it  is  not  liable 
to  the  objection,  that  to  assert  that  the  authority  to  lay  taxes 
implies  that  of  ap[)ropriating  the  proceeds,  is  a  forced  construc- 
tion. It  is  equally  free  of  any  objection  derived  from  any  pre- 
sumed meaning  of  the  words  "  general  welfiire,"  since  the  power 
to  lay  duties  will,  in  this  instance,  be  exercised,  in  order  to  carry 
into  efi'ect  several  express  provisions  of  the  Constitution,  having 
the  same  object  in  view.  Congress  may,  if  it  deems  it  proper, 
lay  a  stamp  duty  on  small  notes,  which  will  put  an  end  to  their 
circulation.  It  may  lay  such  a  duty  on  all  bank  notes,  as  would 
convert  all  the  banks  into  banks  of  discount  and  dej)osit  only, 
annihilate  the  paper  currency,  and  render  a  Bank  of  the  United 
States  unnecessary  in  reference  to  that  object.     But  if  this  last 


76  BANKS  AND  CURRENCT. 

Kieasure  should  be  deemed  pernicious,  or  prove  impracticable^ 
Congress  must  resort  to  other  and  milder  means  of  regulating 
the  currency  of  the  country.  The  Bank  of  the  United  States, 
gs  has  already  been  shown,  was  established  for  that  express  pur^ 
pose. 

An  act  incorporating  a  bank,  is  not  an  act  either  to  raise  or 
appropriate  money.  The  power  to  establish  the  bank  cannot, 
in  any  way,  be  founded  on  that  clause  of  the  Constitution  which 
has  reference  to  the  general  welfare  of  the  United  States.  It  is 
sanctioned  exclusively  by  that  clause  which  gives  to  Congress 
power  to  make  all  laws,  which  shall  be  necessary  and  proper 
for  carrying  into  execution  any  of  the  powers  vested  in  the 
government  of  the  United  States.  And  the  first  object  of  in«i- 
quiry  is  the  meaning  of  the  words  "  necessary  and  proper"  in 
that  clause. 

We  are  aware,  that  it  has  at  times  been  suggested  that  the 
word  "  necessary,"  in  its  strict  sense,  means  *^  that  without 
which  the  specific  power  cannot  be  carried  into  effect,"  and 
ought  to  be  so  construed.  If  appeal  be  made  to  verbal  criticism, 
it  may  be  answered,  that  if  such  was  the  meaning  of  the  word 
"  necessary,"  in  that  sentence,  the  word  "  proper"  would  not 
have  been  added ;  since  that  which  is  necessary  in  that  strict 
sense  is  of  necessity  proper.  This  last  expression  must,  there» 
fore,  be  taken  in  connexion  with  the  first ;  and  since  it  was  con- 
templated, that  what  was  called  necessary  might  be  proper  or 
improper,  the  words  "  laws  necessary  and  proper"  do  not  ap- 
pear to  have  been  intended  in  that  most  limited  sense,  which 
implies  absolute  impossibility  of  effecting  the  object  without  the 
law,  but  to  mean  such  laws  as  are  fairly  intended,  and  highly 
useful  and  important  for  that  purpose.  We  believe  this  to  be  the 
fair,  and  to  have  been  the  uniform  construction  of  the  Constitu- 
tion, and  that  indeed  without  which  it  could  not  have  been  car- 
ried into  effect.  In  order  to  prove  that  this  has  ever  been  deem- 
ed the  natural  and  clear  construction,  we  will  not  resort  to  the 
establishment  of  light-houses,  or  to  other  numerous  precedents, 
the  authority  of  which  may  be  disputed.  We  will  appeal  to  the 
most  general  and  important  law  of  the  United  States,  such  as  it 
was  enacted  from  the  first  organization  of  the  government  un- 
der the  Constitution,  and  to  a  provision  in  it,  which,  under  its 
various  other  modifications,  has  uninterruptedly,  and  without 
any  constitutional  objection,  remained  in  force  to  this  day. 

The  laws  to  lay  and  collect  duties  on  imports  require,  and 
have  always  required,  a  variety  of  oaths,  and  particularly  that 
of  the  importers  or  consignees,  with  respect  to  the  correctness 
of  the  invoices  of  goods  imported,  both  as  to  quantity  and  as 
to  cost  or  value.  Yet  this  provision,  however  useful  and  im- 
portant, is  not  so  absolutely  necessary,  in  that  strict  sense  of 
the  word,  as  that  the  laws  could  not  possibly  be  carried  into  ef- 


BANKS  AND  CURRENCY.  77 

feet  without  it.  There  are  countries,  France  for  example,  where 
those  duties  are  efficiently  collected  without  the  assistance  of 
similar  oaths.  This  may  be  done  at  least  as  effectually  by  an  ap- 
praisement of  the  merchandise,  as  by  resorting  to  the  oaths  of 
the  parties.  In  point  of  fact,  there  has  always  been  a  discretion- 
ary power  to  appraise,  which  has  lately  been  enlarged.  Since  it 
is  on  that  provision,  and  not  on  the  oath,  that  the  ultimate  re- 
liance for  the  faithful  collection  of  the  duties  is  placed,  those 
duties  might  be  collected  without  the  assistance  of  oaths,  by  sub- 
stitutir^  in  every  instance  an  appraisement  or  valuation.  Oaths 
are  not,  therefore,  necessary  for  the -collection  of  duties,  in  that 
strict  sense  which  is  contended  for :  they  are  not  that,  without 
which  the  duties  could  not  be  collected.  The  observation  indeed 
applies  to  various  other  provisions  of  the  revenue  laws.  Any 
one  who  will  give  them  a  perusal,  will  find  several  implying 
powers  not  specially  vested  in  Congress,  the  necessity  of  which 
was  not  absolute,  and  without  which  the  object  of  the  law  might 
still  have  been  effected.  The  oaths  and  various  other  provisions- 
have  been  resorted  to,  as  means  only  highly  useful,  important, 
and  proper,  but  not  as  being  of  absolute  necessity  for  carrying 
the  law  into  effect.* 

Whenever  it  becomes  the  duty  of  Congress  to  carry  into  ef- 
fect any  of  the  powers  expressly  defined  by  the  Constitution,  it 
will  generally  be  found  that  there  are  several  means  to  effect  the 
object.  In  that  case,  and  whenever  there  is  an  option,  each  of 
the  means  proposed  ought  not  to  be  successively  objected  to,  a» 
not  being  strictly  necessary  because  other  means  might  be  re- 
sorted to,  since  this  mode  of  arguing  would  defeat  the  object 
intended,  and  prevent  the  passage  of  any  law  for  carrying  into 
effect  the  power,  which  it  was  the  duty  of  Congress  to  execute. 
If  every  provision  of  a  revenue  law  was  successively  opposed 
on  that  ground,  no  efficient  revenue  law  could  be  passed.  In  the 
present  case,  it  is  proposed  to  resort,  either  to  a  stamp  duty  or 
to  a  Bank  of  the  United  States,  in  order  to  regulate  the  cur- 
rency. Unless  some  other  equally  efficient  mode  can  be  sug- 
gested, this  important  object  will  be  defeated,  if  both  means  are 
successively  rejected,  as  not  strictly  necessary.  But,  on  the 
other  hand,  the  means  proposed  for  carrying  into  effect  any  spe- 
cial ox  expressed  power  vested  in  Congress,  should  be  highly 
useful  and  important,  having  clearly  and  bona  fide  that  object  in 
view  which  is  the  avowed  purpose,  and  not  be  intended,  under 
color  of  executing  a  certain  special  power,  for  the  purpose  of 
effecting  another  object. 

It  was  on  this  ground,  that  the  former  Bank  of  the  United 

•  The  opinion  of  the  Supreme  Court,  in  the  cane  of  M'CuUoch  vs.  Stale  of  Mary- 
land, harl  not  been  «npn  by  the  writer  of  this  f-(i«ay,  when  it  wnn  committed  to  th« 
press :  and  the  important  inferfncp,  drawn  from  the  use  of  the  wordi  "  nbaolulcljr 
necesfiary,"  in  anotJier  claiiao  of  ilie  Constitution,  had  escaj)od  Uis  D0lic« 


78  BANKS  AND  CURRENCY. 

States  was  at  first  opposed.  That  Bank  had  not  been  proposed 
for  the  express  purpose  of  regulating  the  currency,  but  as  inci- 
dent to  the  powers  of  regulating  commerce,  of  collecting  the 
revenue,  of  the  safe  keeping  of  public  moneys,  and  generally, 
of  carrying  on  the  operations  of  the  Treasury.  There  had  been 
at  that  time  but  three  banks  established  in  the  United  States ; 
their  operations  were  confined  within  a  very  narrow  sphere; 
there  had  been  no  experience  in  the  United  States  of  the  utility 
of  a  bank  in  assisting  the  operations  of  government,  but  that 
which,  during  a  short  time,  had  been  afforded  by  the  Bank  of 
North  America,  incorporated,  in  the  first  instance,  by  Congress, 
under  the  articles  of  confederation.  The  Bank  of  the  United 
States  was  considered  by  its  opponents,  as  not  being  intended 
for  the  purpose  alleged,  but  as  having  for  its  object  the  consoli- 
dation of  a  moneyed  aristocracy,  and  to  further  the  views  at 
that  time  ascribed  to  a  certain  party  and  to  its  presumed  leader. 
And  the  fears  then  excited  respecting  that  object,  and  the  sup- 
posed influence  of  the  Bank  in  promoting  it,  though  long  since 
dissipated,  have  left  recollections  and  impressions  which  may 
still  have  some  effect  on  public  opinion  in  relation  to  the  consti- 
tutional question. 

Experience,  however,  has  since  confirmed  the  great  utility  and 
importance  of  a  Bank  of  the  United  States,  in  its  connexion  with 
the  Treasury.  The  first  great  advantage  derived  from  it,  consists 
in  the  safe  keeping  of  the  public  moneys,  securing,  in  the  first 
instance,  the  immediate  payment  of  those  received  by  the  prin- 
cipal collectors,  and  affording  a  constant  check  on  all  their  trans- 
actions ;  and  afterwards  rendering  a  defalcation  in  the  moneys 
once  paid,  and  whilst  nominally  in  the  Treasury,  absolutely  im- 
possible. The  next  and  not  less  important  benefit  is  to  be  found 
in  the  perfect  facility  with  which  all  the  public  payments  are 
made  by  checks,  or  Treasury  drafts,  payable  at  any  place  where 
the  Bank  has  an  office ;  all  those  who  have  demands  against  gov- 
ernment, are  paid  in  the  place  most  convenient  to  them ;  and 
the  public  moneys  are  transferred,  through  our  extensive  terri- 
tory, at  a  moment's  warning,  without  any  risk  or  expense,  to  the 
places  most  remote  from  those  of  collection,  and  wherever  pub- 
lic exigencies  may  require.  From  the  year  1791  to  this  day, 
the  operations  of  the  Treasury  have,  without  interruption,  been 
carried  on  through  the  medium  of  banks ;  during  the  years  1811 
to  1816,  through  the  state  banks;  before  and  since,  through  the 
Bank  of  the  United  States.  Every  individual  who  has  been  at 
the  head  of  that  department,  and,  as  we  believe,  every  officer 
connected  with  it,  has  been  made  sensible  of  the  great  difficul- 
ties, that  must  be  encountered  without  the  assistance  of  those 
institutions,  and  of  the  comparative  ease  and  great  additional 
security  to  the  public,  with  which  their  public  duties  are  per- 
formed through  the  means  of  the  banks.  To  insist  that  the  ope- 


BANKS  AND  CURRENCY.  ?» 

rations  of  the  Treasury  may  be  carried  on  with  equal  facility 
and  safety,  through  the  aid  of  the  state  banks,  without  the  in- 
terposition of  a  Bank  of  the  United  States,  would  be  contrary  to 
fact  and  experience.  That  great  assistance  was  received  from 
the  state  banks,  while  there  was  no  other,  has  always  been  freely 
and  cheerfully  acknowledged.  But  it  is  impossible,  in  the  nature 
of  things,  that  the  necessary  concert  could  be  made  to  exist  be- 
tween thirty  different  institutions;  and  in  some  instances,  heavy 
pecuniary  losses,  well  known  at  the  seat  of  government,  have 
been  experienced.  To  admit,  however,  that  state  banks  are  ne- 
cessary for  that  purpose,  is  to  give  up  the  question.  To  admit 
that  banks  are  indispensable  for  carrying  into  effect  the  legiti- 
mate operations  of  government,  is  to  admit  that  Congress  has 
the  power  to  establish  a  bank.  The  general  government  is  not 
made  by  the  Constitution  to  depend,  for  carrying  into  effect 
powers  vested  in  it,  on  the  uncertain  aid  of  institutions,  created 
by  other  authorities,  and  which  are  not  at  all  under  its  control. 
It  is  expressly  authorized  to  carry  those  powers  into  effect  by 
its  own  means,  by  passing  the  laws  necessary  and  proper  for 
that  purpose,  and  in  this  instance,  by  establishing  its  own  bank, 
instead  of  being  obliged  to  resort  to  those  which  derive  their 
existence  from  another  source,  and  are  under  the  exclusive  con- 
trol of  the  different  states,  by  which  they  have  been  estab- 
lished. 

It  must  at  the  same  time  be  acknowledged,  that,  inasmuch  as 
the  revenue  may  be  collected,  and  the  public  moneys  may  be 
kept  in  public  chests,  and  transferred  to  distant  places  without 
the  assistance  of  banks,  and  as  all  this  was  once  done  in  the 
United  States,  and  continues  to  be  done  in  several  countries, 
without  any  public  bank,  it  cannot  be  asserted,  that  those  insti- 
tutions are  absolutely  necessary  for  those  purposes,  if  we  take 
the  word  "  necessary"  in  that  strict  sense  which  has  been  al- 
luded to.  All  this  may  be  done,  though  with  a  greater  risk, 
and  in  a  more  inconvenient  and  expensive  manner.  Public 
chests  might  be  established,  and  public  receivers,  or  sub-trea- 
surers, might  be  appointed  in  the  same  places  where  there  are 
now  ofKces  of  the  Bank  of  the  United  States,  and  specie  might 
be  transported  from  place  to  place,  as  the  public  service  requir- 
ed it,  or  inland  bills  of  exchange  purchased  from  individuals.* 

*  With  the  exception  of  the  i)ovvpr  of  receiving  private  deposits,  the  object  of 
v\lii(h  provision  is  not  perceived,  this  is  precisely  the  species  of  National  Bank, 
which  has  been  suggested  in  tlie  President's  last  message.  The  question,  whether 
the  purchase  of  drafts  would,  as  we  think,  be  a  charge  on  the  Treasury,  or  prove,  oh 
eccins  to  be  ex|iected,  a  source  of  [irofil,  is  one  of  secondary  im|Kjrtance.  Il  is  sufTi- 
cieiit  lo  observe,  that  the  issues  of  the  state  banks  could  not,  nor  indeed  is  it  antici- 
pated in  the  message  that  they  would,  be  checked  by  this  plan.  It  woidd  not,  thorc- 
fiire,  effect  the  groat  object  contrm|ilni<,'d  by  the  Constitution,  l«  carry  which  into 
effect  is  enjoined  by  that  instnimenl,  and  for  which  wo  principally  contend,  viz.  thai 
of  securing  a  sound  and  uniform  currency. 


80  BANKS  AND  CURRENCY. 

The  superior  security  and  convenience  afforded  by  the  bank,  in 
the  fiscal  operations  of  government,  may  not  be  considered  as 
sufficient  to  make  its  establishment  constitutional,  in  the  opinion 
of  those  who  construe  the  word  "  necessary"  in  that  strict  sense. 

But  it  is  far  from  being  on  that  ground  alone,  that  the  ques- 
tion of  constitutionality  is  now  placed.  It  was  not  at  all  antici- 
pated, at  the  time  when  the  former  Bank  of  the  United  States 
was  first  proposed,  and  when  constitutional  objections  were  rais- 
ed against  it,  that  bank  notes  issued  by  multiplied  state  banks, 
gradually  superseding  the  use  of  gold  and  silver,  would  become 
the  general  currency  of  the  country.  The  effect  of  the  few 
banks  then  existing,  had  not  been  felt  beyond  the  three  cities 
where  they  had  been  established.  The  states  were  forbidden  by 
the  Constitution  to  issue  bills  of  credit :  bank  notes  are  bills  of 
credit  to  all  intents  and  purposes ;  and  the  state  could  not  do, 
through  others,  what  it  was  not  authorized  to  do  itself:  but  the 
bank  notes,  not  being  issued  on  the  credit  of  the  states,  nor  guar- 
antied by  them,  were  not  considered  as  being,-  under  the  Con- 
stitution, bills  of  credit  emitted  by  the  states.  Subsequent  events 
have  shown,  that  the  notes  of  state  banks,  pervading  the  whole 
country,  might  produce  the  very  effect  which  the  Constitution 
had  intended  to  prevent,  by  prohibiting  the  emission  of  bills  of 
credit  by  any  state.  The  injustice  to  individuals,  the  embar- 
rassments of  government,  the  depreciation  of  the  currency,  its 
want  of  uniformity,  the  moral  necessity  imposed  on  the  commu- 
nity, either  to  receive  that  unsound  currency,  or  to  suspend 
every  payment,  purchase,  sale,  or  other  transaction,-  incident  to 
the  wants  of  society,  all  the  evils  which  followed  the  suspension 
of  specie  payments,  have  been  as  great,  if  not  greater,  than 
those  which  might  have  been  inflicted  by  a  paper  currency, 
issued  under  the  authority  of  any  state.  We  have  already  ad- 
verted to  the  several  provisions  of  the  Constitution,  which  gave 
to  Congress  the  right,  and  imposed  on  it  the  duty  to  provide  a 
remedy ;  but  there  is  one  which  deserves  special  consideration. 

Whatever  consequences  may  have  attended  the  suspension 
of  specie  payments  in  Great  Britain,  there  still  remained  one 
currency  which  regulated  all  the  others.  All  the  country  bank- 
ers were  compelled  to  pay  their  own  notes,  if  not  in  specie,  at 
least  in  notes  of  the  Bank  of  England.  These  notes  were,  as  a 
standard  of  value,  substituted  for  gold  :  and,  if  the  currency  of 
the  country  was  depreciated,  and  fluctuating  in  value  from 
time  to  time,  it  was  at  the  same  time  uniform  throughout  the 
country.  There  was  but  one  currency  for  the  whole,  and 
every  variation  in  its  value  was  uniform  as  to  places,  and  at 
the  same  moment  operated  in  the  same  manner  everywhere. 
But  the  currency  of  the  United  States,  or,  to  speak  more  cor- 
rectly, of  the  several  states,  varied,  during  the  suspension  of 
specie  payments,  not  only  from  time  to  time,  but  at  the  same 


BANKS  AND  CURRENCY.  81 

time  from  state  to  state,  and  in  the  same  state  from  place  to 
place.  In  New-England,  where  those  payments  were  not  dis- 
continued, the  currency  was  equal  in  value  to  specie :  it  was, 
<it  the  s<ime  time,  at  a  discount  of  seven  per  cent,  in  New-York 
and  Charleston,  of  lifteen  in  Philadelphia,  of  twenty  and  twenty- 
tive  in  Baltimore  and  Washington,  with  every  other  possible 
variation  in  other  places  and  states. 

The  currency  of  the  United  States,  in  which  the  public  and 
private  debts  were  paid,  and  the  public  revenue  collected,  not 
only  was  generally  depreciated,  but  was  also  defective  in  respect 
to  uniformity.  Independent  of  all  the  other  clauses  in  the  Con- 
stitution which  relate  to  that  subject,  it  is  specially  provided,  1st, 
that  all  duties,  imposts,  and  excises,  shall  be  uniform  through- 
eut  the  United  States ;  2d,  that  representative  and  direct  taxes 
shall  be  apportioned  among  the  several  states,  according  to  their 
respective  numbers,  to  be  determined  by  the  rule  therein  speci- 
fied ;  and  that  no  capitation  or  other  direct  tax  shall  be  laid, 
unless  in  proportion  to  the  enumeration.  Both  these  provisions 
were  violated  whilst  the  suspension  of  specie  payments  con- 
tinued. It  is  clear,  that  after  the  quota  of  the  direct  tax  of  each 
state  had  been  determined,  according  to  the  rule  prescribed  by 
the  Constitution,  it  w^as  substantially  changed  by  being  collected 
in  currencies  dilTering  in  value  in  the  several  states.  It  is  not 
less  clear,  that  the  clause  which  prescribes  a  uniformity  of  du- 
ties, imposts,  and  excises,  was  equally  violated  by  collecting 
every  description  of  indirect  duties  and  taxes  in  currencies  of 
tlilFerent  value.  The  only  remed}^  existing  at  that  time,  was 
the  permission  to  pay  direct  and  indirect  taxes  in  treasury  notes. 
But  those  notes  did  not  pervade  every  part  of  the  country  in  the 
same  manner  as  bank  notes;  they  were  of  too  high  denomina- 
tion to  be  used  in  the  payment  of  almost  any  internal  tax;  they 
were  liable  also  to  vary  in  value  in  the  diilerent  states;  and 
they  could  operate  as  a  remedy,  only  as  long  as  their  deprecia- 
tion was  greater  than  that  of  the  most  depreciated  notes  in  cir- 
culation. 

We  will  now  ask,  whether,  independent  of  every  other  con- 
sideration, Congress  was  not  authorized  and  bound  to  pass  the 
iaws  necessary  and  proper  for  carrying  into  effect,  with  good 
faith,  those  provisions  of  the  Constitution  ?  and  wliether  that 
^ould  or  can  be  done,  in  any  other  manner  than,  either  by  re- 
verting to  a  purely  metallic,  or  by  substituting  a  uniform  paper 
currency  to  that  which  had  proved  so  essentially  defective  in 
that  respect,  and  which,  from  its  not  being  subject  to  one  and 
the  same  control,  is,  and  for  ever  will  be,  liable  to  that  defect  ? 
The  uniformity  of  duties  and  taxes  of  every  description,  whether 
internal  or  external,  direct  or  indirect,  is  an  essential  and  funda- 
mental principle  of  the  Constitution.  It  is  self-evident,  tbat  that 
»iniformitv  cannot  be  carried  info  pffcrt  wifboiit  a  rorrc^ponding 

I 


82  BANKS  AND  CURRENCT. 

uniformity  of  currency.  Without  laws  to  this  effect,  it  is  abso^ 
lutely  impossible  that  the  taxes  and  duties  should  be  uniform,  a* 
the  Constitution  prescribes :  such  laws  are  therefore  necessary 
and  proper,  in  the  most  strict  sense  of  the  words.  There  are  but 
two  means  of  effecting  the  object,  a  metallic,  or  a  uniform  paper 
currency.  Congress  has  the  option  of  either ;  and  either  of  the 
two,  which  may  appear  the  most  ehgible,  will  be  strictly  con- 
stitutional, because  strictly  necessary  and  proper  for  carrying 
into  effect  the  object.  If  a  currency  exclusively  metallic  is  pre- 
ferred, the  object  will  be  attained  by  laying  prohibitory  stamp 
duties  on  bank  notes  of  every  description,  and  without  excep- 
tion. If  it  is  deemed  more  eligible,  under  existing  circumstances, 
instead  of  subverting  the  whole  banking  system  of  the  United 
States,  and  depriving  the  community  of  the  accommodations 
which  bank  loans  atibrd,  to  resort  to  less  harsh  means ;  recourse 
must  be  had  to  such,  as  will  insure  a  currency  sound  and  uni- 
form itself,  and  at  the  same  time  check  and  regulate  that  which 
will  continue  to  constitute  the  greater  part  of  the  currency  of 
the  country. 

Both  those  advantages  were  anticipated  in  the  establishment 
of  the  Bank  of  the  United  States ;  and  it  appears  to  us  that  the 
bank  fulfils  both  those  conditions.  As  respects  the  past,  it  is  a 
matter  of  fact,  that  specie  payments  were  restored  and  have 
been  maintained  through  the  instrumentality  of  that  institution. 
It  gives  a  complete  guarantee,  that  under  any  circumstances, 
its  notes  will  preserve  the  same  imiformity  which  they  now  pos- 
sess. Placed  under  the  control  of  the  general  government,  rely- 
ing for  its  existence  on  the  correctness,  prudence,  and  skill  with 
which  it  shall  be  administered,  perpetually  watched  and  occa- 
sionally checked  by  both  the  Treasury  Department  and  rival 
institutions;  and  without  a  monopoly,  yet  vcith  a  capital  and 
resources  adequate  to  the  object  for  which  it  was  established ; 
the  bank  also  affords  the  strongest  security  which  can  be  given 
with  respect  to  paper,  not  only  for  its  ultimate  solvency,  but  also 
for  the  uninterrupted  soundness  of  its  currency.  The  statements 
we  have  given  of  its  progressive  and  present  situation,  show 
how  far  those  expectations  have  heretofore  been  realized. 

Those  statements  also  show,  that  the  Bank  of  the  United 
States,  wherever  its  operations  have  been  extended,  has  effectu- 
ally checked  excessive  issues  on  the  part  of  the  state  banks,  if 
not  in  every  instance,  certainly  in  the  aggregate.  They  had 
been  reduced,  before  the  year  1820,  from  sixty-six  to  less  than 
forty  millions.  At  that  time,  those  of  the  Bank  of  the  United 
States  fell  short  of  four  millions.  The  increased  amount  re- 
quired by  the  increase  of  population  and  wealth  during  the  ten 
ensuing  years,  has  been  supplied  in  a  much  greater  proportion 
by  that  bank  than  by  those  of  the  states.  With  a  treble  capital,^ 
they  have  added  little  more  than  eight  millions  to  their  issues- 


BANKS  AND  CURRENCY.  83 

Those  of  the  Bank  of  the  United  States  were  nominally  twelve, 
in  reality  about  eleven  millions  greater  in  November  1829,  than 
in  November  1819.  The  whole  amount  of  the  paper  currency 
has,  during  those  ten  years,  increased  about  forty-five,  and  that 
portion  which  is  issued  by  the  state  banks  only  twenty-two  and 
a  half  per  cent.  We  have  indeed  a  proof,  not  very  acceptable 
perhaps  to  the  bank,  but  conclusive  of  the  fact,  that  it  has  per- 
formed the  office  required  of  it  in  that  respect.  The  general 
complaints,  on  the  part  of  many  of  the  state  banks,  that  they 
are  checked  and  controlled  in  their  operations  by  the  Bank  of 
the  United  States,  that,  to  use  a  common  expression,  it  operates 
as  a  screw,  is  the  best  evidence  that  its  general  operation  is 
such  as  had  been  intended.  It  was  for  that  very  purpose  that 
the  bank  was  established.  We  are  not,  however,  aware  that 
a  single  solvent  bank  has  been  injured  by  that  of  the  United 
States,  though  many  have  undoubtedly  been  restrained  in  the 
extent  of  their  operations,  much  more  than  was  desirable  to 
them.  This  is  certainly  inconvenient  to  some  of  the  banks,  but 
in  its  general  effects  is  a  public  benefit  to  the  community. 

The  best  way  to  judge  whether,  in  performing  that  unpopu- 
lar duty,  the  Bank  of  the  United  States  has  checked  the  opera- 
tions of  the  state  banks  more  than  was  necessary,  and  has  abused, 
in  order  to  enrich  itself  at  their  expense,  the  power  which  was 
given  for  another  purpose,  is  to  compare  their  respective  situa- 
tions in  the  aggregate.  In  order  to  avoid  any  erroneous  itifcr- 
ence,  we  will  put  out  of  question  those  banks  of  which  we  could 
only  make  an  estimate,  and  compare,  with  that  of  the  United 
States,  those  only  of  wliich  we  have  actual  returns. 

The  profit  of  banks,  beyond  the  interest  on  their  own  capital, 
consists  in  that  which  they  receive  on  the  difTcrence  between 
the  aggregate  of  their  deposits  and  notes  in  circulation,  and  the 
amount  of  specie  in  their  vaults.  We  have  given  the  aggregate 
situation  for  the  end  of  the  year  1829  of  281  banks  with  a  capi- 
tal of  95,003,557  dollars,  the  deposits  and  circulating  notes  of 

which  amounted  together  to $71,700,03;} 

from  which  deducting  the  specie  in  their  vaults,  -     11,989,(W:) 

leaves  for  the  said  difference, 59,710,300 

or  G2.8  per  cent,  on  their  capital. 

The  notes  in  circulation  of  the  Bank  of  the  United  States 
(adding  one  million  for  its  drafts  in  circulation)  amounted  in 
November  18-29,  to  §14,042,984,  and  together  with  the  deposits, 

to $28,827,793 

from  which  deducting  the  specie  in  its  vaults,  -     -       7,175,274 

leaves  for  the  difference. 21,052,519 

or  01.8  on  its  capital. 


84  BANKS  AND  CURRENCY. 

It  is  clear  that  those  state  banks,  taken  in  the  aggregate,  have 
no  just  reason  to  complain,  since  that  of  the  United  States  im- 
poses no  greater  restraints  on  them  than  on  itself.  It  will  also 
be  perceived  that  it  had  in  specie,  more  than  one-fifth  part  of 
the  aggregate  of  its  notes  in  circulation  and  deposits;  whilst  the 
state  banks  had  little  more  than  one-sixth ;  and  the  Bank  of  the 
United  States  had  in  addition  a  fund  of  about  one  million  of  dol- 
lars in  Europe.  The  difference  would  have  been  more  striking, 
had  we  taken  a  view  of  the  situation  of  all  the  state  banks,  in- 
cluding those  on  estimate;  for  the  difference  between  the  aggre- 
gate of  their  notes  and  deposits,  and  their  specie,  is  67\  on  their 
capital. 

This  view  of  the  subject  applies  to  the  present  time,  when 
the  Bank  of  the  United  States  has  surmounted  the  difficulties 
which  it  had,  in  its  origin,  to  encounter,  and  has  reached  a 
high  degree  of  prosperity.  It  did  not  go  into  operation  till  the 
commencement  of  the  year  1817,  and  such  were  the  losses  which 
it  first  experienced,  that  its  dividends,  during  the  first  six  years 
of  its  existence,  fell  short  of  3^  per  cent,  a  year.  The  dividend 
has  since  gradually  increased  from  5  to  7  per  cent. ;  but  the 
average,  during  the  thirteen  years  and  a  half  ending  on  the  1st 
of  July  1830,  has  been  but  4x^/0  per  cent,  a  year.  An  annual 
dividend  of  about  9  per  cent,  during  the  residue  of  the  time  to 
which  the  cliarter  is  limited,  would  be  necessary,  in  order  that 
the  stockholders  should  then  have  received,  on  an  average,  6 
per  cent,  a  year  on  their  capital.  The  dividends  of  the  state 
banks  vary  too  much,  and  our  returns  are  too  imperfect  in  that 
respect,  to  enable  us  to  estimate  the  average ;  but  it  has  certain- 
ly far  exceeded  that  of  the  Bank  of  the  United  States. 

The  manner  in  which  the  Bank  checks  the  issues  of  the  state 
banks  is  equally  simple  and  obvious.  It  consists  in  receiving  the 
notes  of  all  those  which  are  solvent,  and  requiring  payment 
from  time  to  time,  without  suffering  the  balance  due  by  any  to 
become  too  large.  Those  notes  on  hand,  taking  the  average  of 
the  three  and  a  half  last  years,  amount  always  to  about  a  mil- 
lion and  a  half  of  dollars ;  and  the  balances  due  by  the  banks  in 
account  current'  (deducting  balances  due  to  some)  to  about  nine 
hundred  thousand.  We  think  that  we  may  say,  that,  on  this 
operation,  which  requires  particular  attention  and  vigilance, 
and  must  be  carried  on  with  great  firmness  and  due  forbear- 
ance, depends  almost  exclusively  the  stability  of  the  currency 
of  the  country. 

The  President  of  the  United  States  has  expressed  the  opinion, 
that  the  bank  had  failed  in  the  great  end  of  establishing  a  uni- 
form and  sound  currency,  and  has  suggested  the  expediency  of 
establishing  "  a  National  Bank,  founded  upon  the  credit  of  the 
government  and  its  revenues."  He  has  clearly  seen,  that  the 
uniformity  of  the  currency  was  a  fundamental  principle  derived 


BANKS  AND  CURRENCY.  85 

from  the  Constitution,  and  that  this,  unless  the  United  States 
reverted  to  a  purely  metallic  currency,  could  not  be  effected 
without  the  aid  of  a  National  Bank.  But  it  appears  to  us,  that 
the  objection  of  want  of  unifornnity,  which  may  be  supported  in 
one  sense,  though  not  in  the  constitutional  sense  of  the  word, 
applies  generally  to  a  paper  currency,  and  not  particularly  to 
that  which  is  issued  by  the  Bank  of  the  United  States.  And  al- 
though we  are  clearly  of  opinion,  that  the  United  States  at 
large  are  entitled  to  the  pecuniary  profit  arising  from  the  sub- 
stitution of  a  paper,  for  a  metallic  currency,  we  are  not  less 
convinced,  that  this  object  cannot  be  attained  in  a  more  eligi- 
ble way  and  more  free  of  objections,  than  through  the  medium 
of  a  National  Bank,  constituted  on  the  same  principles  as  that 
now  existing.  On  both  those  topics  we  will  make  but  few  ob- 
servations, those  branches  of  the  subject  having  been  nearly 
exhausted,  in  their  report,  by  the  Committee  of  the  House  of 
Representatives. 

It  has  already  been  observed,  that  the  substitution  of  paper 
to  gold  and  silver  is  a  national  benefit,  in  as  far  as  it  brings  into 
activity  an  additional  circulating  capita!,  equal  to  the  diflerence 
between  the  amount  of  paper,  and  that  of  the  reserve  in  specie 
necessary  to  sustain  tlie  par  value  of  that  paper.  But  it  is  clear, 
that  the  community  derives  no  other  immediate  benefit  from 
the  substitution,  than  the  accommodations  which  the  banks  arc 
thereby  enabled  to  afford,  and  for  which  the  borrowers  pay  the 
usual  rate  of  interest.  The  immediate  profit  derived  from  the 
papercurrency,is received  exclusively  by  the  banks;  about  three- 
fourths  by  the  state  banks,  and  one-fourth  by  that  of  the  United 
States.  So  far  as  relates  to  profit,  it  is  only  to  that  one-fourth 
part  of  the  whole,  that  the  measures  of  the  general  government 
are  intended  to  apply.  Several  of  the  states,  by  levying  a  tax 
on  the  capital  or  on  the  dividends  of  their  own  banks,  receive 
the  public  share  of  those  profits.  Other  states  have  resorted  to 
the  mode  suggested  by  the  President,  and  have  established 
banks  of  the  state  exclusively  founded  on  its  resources  and 
revenue. 

The  proposition  has  not  been  suggested  to  resort  to  a  third, 
though  the  most  simple  mode,  that  of  issuing,  without  the  aid 
or  machinery  of  any  bank  whatever,  a  government  paper  pay- 
able on  demand  in  specie.  We  unite  in  considering  it  altogether 
inadmissible.  Government  may  put  its  paper  in  circulation  by 
lending  it,  like  banks,  to  individuals ;  and  this  is,  in  fact,  the 
proposition  which  has  been  suggested.  Hut  unless  this  mode  is 
adopted,  to  issue  paper  in  any  other  way,  is  to  borrow  money  ; 
and  the  United  States  at  this  time  wish  to  disrharg(>  and  not  to 
contract  a  debt.  Nor  would  such  a  pnprr.  without  a  mixture 
of  banking  operations,  control  in  the  lea';t  the  iv^urs  of  state 
banks,  and  assist  in  establishing  a  grnrral  «onnd  rurrencv. 


86  BANKS  AND  CURRENCY. 

The  general  objections  to  a  paper  issued  by  government,  have 
already  been  stated  at  large.  Yet  it  must  be  admitted,  that 
there  may  be  times  when  every  other  consideration  must  yield 
to  the  superior  necessity  of  saving  or  defending  the  country.  If 
there  ever  v^'as  a  time,  or  a  cause  which  justified  a  resort  to 
that  measure,  it  was  the  war  of  the  independence.  It  would  be 
doing  gross  injustice  to  the  authors  of  the  revolution  and  found- 
ers of  that  independence,  to  confound  them  with  those  govern- 
ments, which  from  ambitious  views  have,  without  necessity,  in- 
flicted that  calamity  on  their  subjects.  The  old  Congress,  as  the 
name  purports,  were  only  an  assembly  of  plenipotentiaries, 
delegated  by  the  several  colonies  or  states.  They  could  only 
recommend,  and  had  not  the  power  to  lay  taxes ;  the  country 
was  comparatively  poor ;  extraordinary  exertions  were  neces- 
sary to  resist  the  formidable  power  of  Great  Britain ;  those  ex- 
ertions were  made,  and  absorbed  all  the  local  resources ;  the 
paper  money  carried  the  United  States  through  the  most  ardu- 
ous and  perilous  stages  of  the  war ;  and,  though  operating  as  a 
most  unequal  tax,  it  cannot  be  denied  that  it  saved  the  country. 
Mr.  Jefferson  was  strongly  impressed  with  the  recollection  of 
those  portentous  times,  when  in  the  latter  end  of  the  year  1814, 
he  suggested  the  propriety  of  a  gradual  issue,  by  government, 
of  two  hundred  millions  of  dollars  in  paper.  He  had,  from  the 
imperfect  data  in  his  possession,  greatly  overrated  the  amount 
of  paper  currency  which  could  be  sustained  at  par ;  and  he  had, 
on  the  other  hand,  underrated  the  great  expenses  of  the  war. 
Yet  we  doubt  whether,  in  the  state  to  which  the  banks  and  the 
currency  had  been  reduced,  much  greater  issues  of  Treasury 
notes,  or  other  paper  not  convertible  at  will  into  specie,  would 
not  have  become  necessary,  if  the  war  had  been  of  much  longer 
continuance.  It  is  to  be  hoped  that  a  similar  state  of  things 
will  not  again  occur ;  but  at  all  events,  the  issue  of  a  govern- 
ment paper  ought  to  be  kept  in  reserve  for  extraordinary  exi- 
gencies. 

The  proposition  then  recurs,  to  issue  a  paper  currency  paya- 
ble on  demand  in  specie,  through  the  medium  of  a  bank,  found- 
ed on  the  revenue  of  the  United  States ;  or,  in  other  words,  to 
convert  the  general  government,  or  its  treasury  department, 
into  a  bankine;  institution.  The  experiment  has  been  made  in 
four  of  the  states,  and  may  have  succeeded  on  a  smaller  scale, 
and  where  all  the  agents  are  personally  known  to  government, 
and  are  not  merely  in  name,  but  in  reality,  under  its  immediate 
superintendence.  But  if  thirty-five  millions  of  dollai-s  are  to  be 
placed  at  the  disposal  of  three  hundred  bank  directors,  selected 
by  the  government  of  the  United  States,  and  living  in  twenty- 
five  different  states  or  territories,  with  the  authority  to  contract 
debts  in  behalf  of  the  public  to  an  equal  amount,  and  to  lend 
the  whole  to  individuals  at  their  discretion ;  we  must  inquire. 


BANKS  AND  CURKEINCY.  87 

how  and  over  whom  that  enormous  power  will  be  exercised. 
However  they  may  have  differed  with  respect  to  removals  from 
office,  the  various  administrations,  with  some  exceptions,  com- 
manded by  the  public  interest,  have  all  preferred,  in  appoint- 
ing to  office,  their  friends  to  their  opponents;  and  in  making  the 
selections  at  a  distance,  there  is  not  perhaps,  out  of  ten  officers 
who  are  appointed,  one  who  is  personally  known  either  to  the 
President  or  to  any  of  the  heads  of  the  departments.  It  is  mor- 
ally impossible  that  the  direction  of  the  branches  of  the  pro- 
posed bank  shoukl  not  fall  into  the  hands  of  men  generally  se- 
lected from  pohtical  considerations,  often  of  a  local  nature. 
Without  salary,  or  any  personal  interest  in  the  concern  intrusted 
to  their  care,  they  would  also  be  altogether  irresponsible.  The 
duties  of  the  other  officers  of  government  may  always  be,  and 
always  are,  delined  by  law :  for  any  wilful  official  misconduct, 
for  any  act  of  oppression  towards  individuals,  they  may  be  prose- 
cuted and  punished.  But  tlie  power  voted  in  a  bank  director 
is  in  its  nature  discretionary,  and  error  of  judgment  may  always 
be  pleaded,  for  having  improperly  granted  or  withdrawn  an  ac- 
commodation. The  exercise  of  that  arbitiary  power  over  the 
property  and  private  concerns  of  individuals  would  be  so  odious, 
that,  if  the  attempt  was  made,  we  are  confident  that  it  would 
not  be  long  tolerated.  Considered  as  a  source  of  profit,  which 
is  its  only  recommendation,  it  is  equally  obvious,  that  the  plan 
could  not  succeed ;  that  whenever  there  was  a  temporary  pres- 
sure, and  what  is  called  a  want  of  money,  the  debtors  would  ask 
and  obtain  relief,  and  that  the  same  measure  of  indulgence 
would  gradually  be  extended  to  every  quarter  of  the  Union.  It 
seems  indeed  self-evident,  that  a  government,  constituted  like 
that  of  the  United  States,  cannot  by  itself  manage  and  control 
a  banking  system  spread  over  their  extensive  territory ;  and 
we  know,  on  (lie  other  hand,  that  the  same  object  may  be  at- 
tained through  the  means  of  a  bank  governed  and  controlled 
as  that  of  the  United  States.  It  may  be  added,  that,  if  an  ob- 
jection is  raised  against  that  institution,  because  the  power  to 
incorporate  a  bank  is  not  expressly  granted  by  the  Constitution, 
it  appears  to  be  equally  applicable  to  the  plan  that  has  been 
suggested ;  since  there  is  no  clause  in  that  instrument,  that  ex- 
pressly authorizes  the  government  of  the  United  States  to  dis- 
count the  notes  of  individuals,  or  to  become  a  trading  company. 
The  United  States  are,  liowever,  justly  entitled  to  participate 
in  the  advantages  which  the  bank  derives  from  its  charter,  by 
being  permitted  to  issue  paper,  and  to  extend  its  operations  over 
the  whole  country ;  and  that  institution  must  also  be  allowed,' 
in  addition  to  the  usual  interest  on  its  capital,  a  reasonable  profit? 
since  it  incurs  all  the  risks,  and  is  liai)le  for  all  the  losses  inci- 
dent to  those  operations.  The  government  ri'ceives  already  a; 
portion  of  the  profits,  in  the  slnpc  of  those  services,  which  are 


88  BANKS  AND  CURRENCY. 

rendered  here  gratuitously,  and  form  in  England  no  inconsidera- 
ble part  of  the  benefit  allowed  to  the  bank.  But  for  the  residue, 
we  would  prefer  to  a  bonus,  either  a  moderate  interest  on  the 
public  deposits,  or  a  participation  in  the  dividends  when  exceed- 
ing a  certain  rate.  There  can  l)e  no  doubt,  that,  independent 
of  perfect  security,  the  United  States  would,  in  that  way,  derive 
greater  pecuniaiy  advantages,  than  from  any  bank  managed  by 
its  own  officers. 

In  order  to  attain  perfect  uniformity,  the  value  of  a  paper 
currency  should,  in  the  United  States,  be  always  the  same  as 
that  of  the  gold  and  silver  coins,  of  which  it  takes  the  place.  It 
is  impossible  to  fulfil  that  condition  better,  than  by  making  that 
currency  payable  on  demand  in  specie  and  at  par.  This  cannot 
be  done  but  at  certain  places  designated  for  that  purpose.  The 
holder  of  a  bank  note  cannot,  at  any  other  place,  give  such  note 
in  payment  of  a  debt,  or  exchange  it  for  specie,  without  the 
consent  of  another  party.  Strictly  speaking,  it  is  not,  there- 
fore, at  any  other  place,  of  the  same  value  with  specie.  This 
is  equally  true  of  any  bank  note,  or  convertible  paper,  in  any 
other  country.  A  note  of  the  Bank  of  England,  being  only  paya- 
ble in  London,  will  not  be  of  the  same  value  with  gold  or  silver 
in  Scotland,  Ireland,  or  even  at  Liverpool,  unless  the  exchange 
between  those  places  respectively  and  London  should  be  at  par. 
This  defect  is  inherent  to  every  species  of  paper  currency,  even 
when  payable  on  demand.  There  were  three  hundred  and 
twenty-nine  state  banks,  and  twenty-two  offices  of  the  Bank  of 
the  United  States,  in  operation  on  the  1st  of  January,  1830. 
We  had  therefore  three  hundred  and  fifty-one  distinct  curren- 
cies, all  convertible  into  specie,  but  each  at  diffi^rent  places.  A 
note  of  the  Bank  of  the  United  States,  or  of  the  Bank  of  North 
America,  both  payable  at  Philadelphia,  was  no  more  exchange- 
able for  gold  or  silver,  at  Bedford,  in  Pennsylvania,  than  at  Cin- 
cinnati; the  only  difference  consisting  in  the  greater  distance 
from  the  place  of  payment,  which  renders  a  fluctuation  in  the 
rate  of  exchange  more  probable.  V/hen,  therefore,  it  is  ob- 
jected as  a  want  of  uniformity,  that  the  notes  issued  by  the 
Bank  of  the  United  States,  and  its  several  offices,  are  not  indis- 
criminately made  payable  at  every  one  of  those  places,  the  ob- 
jection does  not  go  far  enough.  In  order  to  attain  perfect  uni- 
formity, or  to  render  those  notes  everywhere  precisely  equal  in 
value  to  specie,  they  should  be  made  payable  at  every  tovyn  or 
village  in  the  United  States.  But,  although  it  may  be  admitted, 
that  the  notes  of  the  Bank  of  the  United  States  now  consist 
nominally  of  tv/enty-four  currencies,  each  payable  at  a  distinct 
place,  they  still  fulfil  the  condition  of  uniformity  required  by  the 
Constitution :  and  the  defect  complained  of  is  not  peculiar  to 
(hem,  ])ut  would  equally  attach  to  any  other  possible  species  of 
bank  notes  or  paper  currency. 


BANKS  AND  CURRENCY.  60 

Those  notes,  wherever  made  payable,  are,  by  the  charter,  re- 
ceivable in  all  payments  to  the  United  States :  and  as  the  bank 
is  obliged,  without  any  allowance  on  account  of  difference  of 
exchange,  to  transfer  the  public  funds  from  place  to  place  within 
the  United  States,  any  loss  arising  from  that  cause  falls  on  the 
institution.  For  that  purpose,  therefore,  all  the  notes  issued  by 
the  bank  constitute  but  one  uniform  currency,  with  which  all 
the  duties,  taxes,  imposts,  and  excises,  may  be  paid.  Not  only 
the  condition  of  uniformity  imposed  by  the  Constitution  is  strict- 
ly fulfilled^  but  by  far  the  greater  part  of  the  notes  which  may 
happen  to  circulate  out  of  the  states  in  which  they  are  made 
payable,  is  also  absorbed  by  that  operation.  The  objection  is 
reduced  to  the  simple  fact,  that  individuals  who  may  still  hold 
such  notes,  cannot  always  exchange  them  at  par  at  a  place  dis- 
tant from  that  where  they  are  payable.  In  answer  to  this,  it 
must,  in  the  first  place,  be  observed,  that  notes  are  never  found 
in  that  situation,  but  by  the  act  of  the  parties  themselves.  The 
bank  and  its  offices  never  issue  or  make  payments  in  notes  pay- 
able at  another  place  than  that  of  issue,  but  at  the  request  of 
individuals,  whose  convenience  it  may  suit  to  apply  for  such 
notes.  Through  whatever  channel  a  man  residing  in  New-Or- 
leans may  have  come  in  possession  of  ten  thousand  dollars  in 
notes  payable  at  Charleston,  it  has  always  been  with  his  own 
consent,  and  never  by  the  act  of  the  bank.  When  this  objec- 
tion is  made,  what  in  fact  is  complained  of,  is,  that  the  bank 
will  not,  or  cannot,  transfer  the  funds  of  individuals,  as  well  as 
those  of  the  public,  from  place  to  place,  gratuitously ;  an  opera- 
tion which  has  no  connexion  with  the  uniformity  of  currency. 
Supposing  there  were  no  bank  notes  in  circulation,  and  there 
was  no  other  but  a  uniform  metallic  currency,  the  man  who 
had  taken  a  cargo  of  flour  from  Louisville  to  Nevv-Orleans,  must, 
in  order  to  transfer  the  proceeds  back  to  Louisville,  either  have 
purchased  a  bill  of  exchange,  or  transported  the  specie.  This 
he  may  still  do,  since  the  institution  of  the  bank ;  and  he  has 
no  more  right  to  ask  from  the  office  at  New-Orleans,  to  give 
him,  in  exchange  for  the  specie,  bank  notes  payable  at  Louis- 
ville, than  to  require  that  it  should  pay  the  freight  of  his  flour 
from  Louisville  to  New-Orleans. 

But  supposing  there  was  any  weight  in  the  objection,  it  is  in- 
herent to  the  nature  of  a  paper,  which  cannot,  in  that  respect, 
be  made  better  than  a  metallic  currency.  If  A  contracts  to  pay 
a  certain  sum  to  B,  it  must  be  at  a  certain  specified  place.  He 
cannot  engage  to  do  it  at  five  or  six  different  places,  at  the 
option  of  B,  since  it  would  compel  him  to  provide  funds  at  all 
those  different  places,  and  therefore  to  five  or  six  times  the 
amount  of  his  debt.  It  is  true,  that  the  Bank  of  the  United 
States  has,  through  its  extensive  dealings  in  exchange,  facilities 
to  give  accommodations  in  that  respect,  which  no  individual 

M 


^0^  BANKS  AND  CURRENCY. 

can  have.  But  it  is  its  interest  to  extend,  as  far  as  is  safe  ana 
practicable,  the  circulation  of  its  notes ;  and  one  of  the  best 
means  to  effect  that  object,  is  to  pay  everywhere  their  notes, 
wherever  issued,  whenever  that  is  practicable.  The  five  dollar 
notes  are  already  made  thus  payable ;  and,  in  reality,  payment 
of  notes  of  every  denomination,  wherever  made  payable,  is  rarely 
refused  at  any  of  the  offices.  The  bank  may  be  safely  trusted 
for  giving  the  greatest  possible  extension  to  a  species  of  accom- 
modation, which  it  is  its  interest  to  give :  but  the  condition  can 
never  be  made  obligatory,  either  on  that  institution,  or  on  any 
other  bank,  by  whatever  name  designated,  or  on  whatever 
principle  constituted,  without  endangering  its  safety.  It  is  ob- 
vious, that  no  bank  which  has  branches,  can  have  funds  at 
every  place  sufficient  to  meet  a  sudden  demand  for  the  payment 
of  a  large  amount  of  notes  payable  elsewhere,  which  may  for- 
tuitously or  designedly  have  accumulated  at  some  one  place. 
Even  supposing  this  to  be  practicable,  the  condition  imposed 
must  necessarily  occasion  an  additional  expense,  much  greater 
than  the  benefit  derived  from  it ;  and  if  this  was  done  through 
the  means  of  a  bank  founded  on  the  public  revenue,  it  would  be 
a  tax  laid  on  the  community,  for  the  advantage  of  a  few  indi- 
viduals. 

A  similar  objection  has  been  made  with  respect  to  the  deal- 
ings ill  domestic  exchange  of  the  bank.  These  consist  of  two 
correlative  but  distinct  operations.  The  bank  purchases  at  Phila- 
delphia, and  at  every  one  of  its  offices,  bills  of  exchange  pay- 
able at  different  dates,  and  on  all  parts  of  the  United  States 
where  there  are  such  offices ;  and  the  bank  and  its  offices  sell 
their  drafts  on  each  other,  payable  at  sight.  The  amount  of  both 
has  been  progressively  increasing,  to  the  great  convenience  of 
the  public.  That  of  bills  of  exchange  was  29,335,254,  and  that 
of  bank  drafts  24,384,232  dollars,  during  the  year  1829.  In  the 
same  year  the  transfers  of  public  moneys,  which  are  effected  by 
treasury  drafts,  analogous  to  bills  of  exchange  at  sight,  have 
amounted  to  9,066,000  dollars.  The  three  items  together  make 
a  total  of  62,785,486  dollars,  transmitted  by  the  bank  in  one 
year,  through  the  medium  of  bills  and  drafts,  which  are  thus 
substituted  to  the  transportation  of  specie  to  the  same  amount. 
The  purchase  of  bills  of  exchange  is  an  operation  similar,  as  re- 
lates to  interest,  to  the  discounting  of  notes.  The  interest  ac- 
cruing, from  the  time  of  purchase  or  discount  to  that  when  they 
become  due,  is  equally  allowed  in  both  cases.  Deducting  this, 
the  gross  profit,  on  the  purchase  of  bills,  arising  from  the  rate 
of  exchange  at  which  they  were  purchased,  amounted  in  the 
year  1829  to  227,224  dollars,  or  less  than  three-fourths  per 
cent.  The  premiums  on  the  sale  of  bank  drafts  amounted  to 
42,826  dollars ;  but  to  this  must  be  added  the  interest  accruing 
on  the  drafts  actually  4n  circulation,  and  which,  estimating,  as 


BANKS  AND  CURRENCY.  91 

before  stated,  the  time  during  which,  on  an  average,  they  re- 
main so,  at  fifteen  days,  amounts  to  near  sixty -one  thousand  dol- 
lars. The  profit  on  those  drafts  is  therefore  near  one  hundred 
and  four  tliousand  dollars,  or  about  three-sevenths  per  cent.  The 
interest  lost  by  the  bank  on  the  treasury  drafts,  is  from  fifteen 
to  twenty  thousand  dollars ;  and  the  charges  for  transportation 
of  specie,  postage,  and  incidental  expenses,  amounted,  in  the 
year  1829,  to  49,847  dollars.  The  nett  profit  of  the  bank,  on 
the  aggregate  of  those  transactions,  is,  therefore,  about  two 
hundred  and  sixty-four  thousand  dollars,  or  a  fraction  more  than 
two-fifths  per  cent,  on  the  whole  amount. 

There  is  not,  it  is  believed,  a  single  country  where  the  com- 
munity is,  in  that  respect,  served  with  less  risk  or  expense.  It 
is  obvious  that  no  one  will  sell  his  bills  to  the  bank,  unless  that 
institution  purchases  them  at  a  higher,  or  at  least  as  high  rate 
as  any  other  person ;  and  that  no  one  will  purchase  its  drafts, 
unless  they  are  as  cheap  as  any  others  at  market,  or  are  con- 
sidered safer.  There  is  no  other  ground  of  complaint,  unless  it 
be  that  the  bank  can  afiford  to  purchase  bills  dearer,  and  to  sell 
its  drafts  cheaper,  than  any  body  else.  This  is  certainly  a  pub- 
lic benefit ;  and  the  only  consideration  which  has  been  urged 
with  some  degree  of  plausibility,  is,  that  one  of  the  reasons 
which  enables  the  bank  to  obtain  a  higher  price  for  its  drafts, 
is  the  greater  degree  of  security  which  they  oflTcr ;  whilst,  at  the 
same  time,  its  peculiar  situation  would  enable  it  to  sell  them 
cheaper  than  other  persons.  Without  admitting  the  vahdity  of 
this  observation,  or  denying  that  the  current  rate  of  exchange 
ought  to  regulate  the  price  of  those  drafts,  we  would  wish  that 
they  might  be  sold  at  par,  whenever  it  hap])ens  that  the  opera- 
tion, from  the  situation  of  its  funds,  is  in  no  degree  inconvenient 
to  the  bank.  Government  receives  its  full  share  of  the  profits  on 
those  operations.  As  its  business  is  done  gratuitously,  it  not  only 
saves  the  interest  as  above  stated,  but  also  the  premium  which 
it  vVould  otherwise  have  to  pay  on  the  sale  of  its  drafts.  This, 
calculated  at  the  same  rate  as  for  other  bills  of  exchange,  would 
amount  to  more  than  seventy,  and  together  with  the  interest,  to 
about  ninety  thousand  dollars  a  year. 

We  have  also  heard  complaints  made  against  the  purchase  of 
foreign  l>iHs  by  the  bank  at  the  south,  and  the  sale  of  their  own 
bills  on  Europe  at  the  east.  That  this  may  interfere  with  the 
business  of  capitalists  who  deal  in  exchange,  is  true ;  but  the 
principal  public  consideration  seems  to  be,  whether  the  bank 
confers  a  benefit  on  the  southern  planters  or  merchants,  by  en- 
tering into  competition  for  the  purchase  of  their  bills,  and  on  the 
public  i)y  otfering  for  sale  cheaper  or  safer  means  of  making 
remittances  abroad.  Another  great  advantage  is  found  in  the 
facility,  thereby  afibnled  to  the  bank,  of  having  a  fund  in  Eng- 
land on  which  it  rrcoives  interest,  and  whirh.  on  an  ernorgcncy, 


92  BANKS  AND  CURRENCY. 

answers  the  same  purpose  as  specie.  That  branch  of  business, 
either  for  the  year  1829,  or  for  the  average  of  that  and  the  two 
preceding  years,  amounted  to  3,580,000  dollars. 

The  principal  advantages  derived  from  the  Bank  of  the  United 
States,  which  no  state  bank,  and,  as  it  appears  to  us,  no  bank 
(established  on  different  principles,  could  afford,  are,  therefore : 
First  and  principally ;  securing  with  certainty  a  uniform,  and, 
as  far  as  paper  can,  a  sound  currency  :  Secondly ;  the  complete 
security  and  great  facility  it  affords  to  government  in  its  fiscal 
operations :  Thirdly ;  the  great  convenience  and  benefit  accru- 
ing to  the  community,  from  its  extensive  transactions  in  domes- 
tic bills  of  exchange  and  inland  drafts.  We  have  not  adverted 
to  the  aid  which  may  be  expected  from  that  institution  in  time 
of  war,  and  which  should,  w^e  think,  be  confined  to  two  objects. 

First.  The  experience  of  the  last  war  has  sufficiently  proved* 
that  an  efficient  revenue  must  be  provided,  before,  or  immedi- 
ately after  that  event  takes  place.  Resort  must  be  had,  for  that 
purpose,  to  a  system  of  internal  taxation,  not  engrafted  on  taxes 
previously  existing,  but  which  must  be  at  once  created.  The 
utmost  diligence  and  skill  cannot  render  such  new  taxes  pro- 
ductive before  twelve  or  eighteen  months.  The  estimated 
amount  must  be  anticipated ;  and  advances  to  that  extent,  in- 
cluding at  least  the  estimated  proceeds  of  one  year  of  all  the 
additional  taxes  laid  during  the  war,  may  justly  be  expected 
from  the  Bank  of  the  United  States. 

Secondly.  It  will  also  be  expected,  that  it  will  powerfully 
assist  in  raising  the  necessary  loans,  not  by  taking  up,  on  its  own 
account,  any  sum  beyond  what  may  be  entirely  convenient  and 
consistent  with  the  safety  and  primary  object  of  the  institution, 
but  by  affording  facilities  to  the  money  lenders.  Those,  who, 
in  the  first  instance,  subscribe  to  a  public  loan,  do  not  intend  to 
keep  the  whole,  but  expect  to  distribute  it  gradually  with  a 
reasonable  profit.  The  greatest  inducement,  in  order  to  obtain 
loans  on  moderate  terms,  consists  in  the  probability  that,  if  that 
distribution  proceeds  slower  than  had  been  anticipated,  the  sub- 
scribers will  not  be  compelled,  in  order  to  pay  their  instalments, 
to  sell  the  stock,  and,  by  glutting  the  market,  to  sell  it  at  a  loss: 
and  the  assistance  expected  from  the  bank  is  to  advance,  on  a 
deposit  of  the  scrip,  after  the  two  first  instalments  have  been 
paid,  such  portions  of  each  succeeding  payment,  as  may  enable 
the  subscribers  to  hold  the  stock  a  reasonable  length  of  time. 
As  this  operation  may  be  renewed  annually,  on  each  successive 
loan,  whilst  the  war  continues,  the  aid  afforded  in  that  manner 
is  far  more  useful  than  large  direct  advances  to  government, 
which  always  cripple  the  resources,  and  may  endanger  the 
safety  of  a  bank. 


NOTES   AND  STATEMENTS. 


NOTE  A. 

RELATIVE  VALUE  OF  GOLD  AND  SILVER. 

It  has  already  been  observed,  that  the  intrinsic  value  and  average  market 
price  of  current  coins  are  greater  than  those  of  bullion  of  the  same  weight 
and  standard ;  and  that  the  difference  is,  on  account  of  the  greater  compa- 
rative expense  of  coinage,  greater  with  respect  to  silver  than  to  gold  coins. 
The  ratio  of  15.7  to  1  is  nearly  that  of  gold  to  silver  bullion  in  France,  and 
it  has  been  found  to  correspond,  during  a  long  period,  with  the  market  price 
in  that  country ;  whilst  the  average  price  of  the  gold  and  silver  coins  has 
been  in  the  ratio  of  about  15.6  to  1,  making  a  difference  of  about  f  per  cent, 
between  the  two  ratios.  The  English  market  is,  with  respect  to  silver, 
much  more  uncertain,  from  the  want  of  a  constant  demand  and  uniform 
mint  price.  Silver  is  accordingly  exported  in  preference  to  France,  and 
gold  to  England.  The  respective  prices,  as  quoted  in  England,  give  the 
ratio  of  gold  coins  to  silver  bullion.  If  this  average  ratio  is  taken  at  15.85 
to  1,  and  the  average  English  market  price  of  standard  gold  bullion  at 
7717^,  the  ratio  of  gold  to  silver  bullion  will  be  found  to  be  less  than  15.8 
to  1 ;  and,  making  the  above-mentioned  allowance  of  f  per  cent,  for  the 
difference  between  the  two  ratios,  that  of  gold  to  silver  coins,  as  deduced 
from  the  British  average  market  prices,  does  not  exceed  15.7  to  1.  It  is, 
in  order  to  guard  against  any  exportation  of  silver,  in  preference  to  gold 
•coins,  and  any  possible  danger  of  altering  the  present  standard  of  value, 
that  we  are  desirous  that  this  ratio  should  not  be  exceeded.  The  premium 
on  gold  coins  in  France,  has,  in  the  text,  been  generally  rated  at  one  half 
per  cent.  The  true  average  taken  for  six  years  was  only  one-third  per 
cent 


NOTE  B. 

ON  SCOTCH  BANKS. 

Chiefly  extracted  from  the  Report  of  the  Select  Cormnittee  of  the  House 
of  Commons  on  Promissory  Notes  of  Scotland  and  Ireland,  May  26, 
1826. 

EXTRACT. 

"There  are  at  present  thirty-two  banks  in  Scotland,  three  of  which  are 
incorporated  by  act  of  Parliament,  or  by  royal  charter,  viz.  The  Bank  of 
Scotland,  the  Royal  Bank  of  Scotland,  and  the  Bank  called  the  British  Linen 
Company. 

The  National  Bank  of  Scotland  has  12.38  partners. 

The  Commercial  Bank  of  Scotland  has  521. 

The  Aberdeen  Town  and  County  Bank  has  446. 

Of  the  remaining  banks  there  are  throe  in  which  the  number  of  partners 
exceeds  100;  six  in  which  the  number  is  between  20  and  100;  and  seven- 
teen in  which  the  number  fillp  s^hort  of  20. 

Tho  gr.MtPr  part  of  tlm  Srotrh  l>anks  have  l.rnnriios  in  ronnoxion  with 
the  priiicipnl  os^tablislmiont,  pjtcli  branch  inaRaifcd  liy  na  i\^p{M  noting  under 


94  BANKS  AND  CURRENCY. 

the  immediate  directions  of  his  employers,  and  giving  security  to  them  for 
his  conduct. 

The  Bank  of  Scotland  had,  at  the  date  of  the  last  return  received  hy 
your  committee,  sixteen  branches,  established  at  various  periods  between 
the  year  1774  and  the  present. 

The  British  Linen  Company  had  twenty-seven  branches. 

The  Commercial  Banking  Company  in  Edinburgh,  thirty-one. 

The  total  number  of  branches  established  in  Scotland  from  the  southern 
border  to  Thurso,  the  most  northerly  point  at  which  a  branch  bank  exists, 
is  one  hundred  and  thirty-three. 

Speaking  generally,  the  business  of  a  Scotch  bank  consists  chiefly  in  the 
receipt  and  charge  of  sums  deposited  with  the  bank,  on  which  an  interest 
is  allowed,  and  in  the  issue  of  promissory  notes  upon  the  discount  of  bills, 
and  upon  advances  of  money  made  by  the  bank  upon  what  is  called  a  cash 
credit. 

The  interest  allowed  by  a  bank  upon  deposits  varies  from  time  to  time, 
accordmg  to  the  current  rate  of  interest  which  money  generally  bears.  At 
present  the  interest  allowed  upon  deposits  is  four  per  cent. 

It  has  been  calculated  that  the  aggregate  amount  of  the  sums  deposited 
with  the  Scotch  banks  amounts  to  about  twenty  or  twenty-one  millions. 
The  precise  accuracy  of  such  an  estimate  cannot  of  course  be  relied  on. 
The  witness  by  whom  it  was  made  thought  that  the  amount  of  deposits  could 
not  be  less  than  sixteen  millions,  nor  exceed  twenty-five  millions,  and  took 
an  intermediate  sum  as  the  probable  amount. 

Another  witness,  who  had  been  connected  for  many  years  with  different 
banks  in  Scotland,  and  has  had  experience  of  their  concerns  at  Stirling, 
Edinburgh,  Perth,  Aberdeen  and  Glasgow,  stated  that  more  than  one-half 
of  the  deposits  in  the  banks  with  which  he  had  been  connected  were  in  sums 
from  ten  pounds  to  two  hundred  pounds." 

"  On  sums  advanced  by  the  banks  on  the  discount  of  bUls  of  exchange, 
and  upon  cash  credits,  an  interest  of  five  per  cent,  is  at  present  charged. 

A  cash  credit  is  an  undertaking  on  the  part  of  a  bank  to  advance  to  an 
individual  such  sums  of  money  as  he  may  from  time  to  time  require,  not 
exceeding  in  the  whole  a  certain  definite  amount,  the  individual  to  whom 
the  credit  is  given  entering  into  a  bond  with  securities,  generally  two  in 
number,  for  the  repayment  on  demand  of  the  sums  actually  advanced,  with 
interest  upon  each  issue  from  the  day  on  which  it  is  made. 

Cash  credits  are  rarely  given  for  sums  below  one  hundred  pounds ;  they 
generally  range  from  two  to  five  hundred  pounds,  sometimes  reaching  one 
thousand  pounds,  and  occasionally  a  larger  sum. 

The  bank  allows  the  party  having  the  cash  credit,  to  liquidate  any  por? 
tion  of  his  debt  to  the  bank,  at  any  time  that  may  suit  his  convenience,  and 
reserves  to  itself  the  power  of  cancelling,  whenever  it  shall  think  fit,  the 
credit  granted." 

The  amount  of  deposits,  on  which  the  Scotch  banks  allow  interest,  may 
be  estimated  at  about  £18,000,000  sterling.  One-half  is  said  to  consist  of 
small  sums  deposited  by  mechanics,  fishermen,  and  laborers ;  and  that  part 
of  the  system  may  be  considered  as  analogous  to  that  of  the  Saving  Banks, 
and  as  having  the  same  beneficial  effect. 

The  cash  credits  are  generally  for  simis  from  200  to  500  pounds,  some- 
tunes  as  high  as  £1000,  and  sometimes  as  low  as  £50.  The  total  amount, 
for  which  credits  are  opened,  is  estimated  at  six,  and  the  average  amount 
actually  dravra,  and  due  to  the  banks,  at  four  millions  sterling.  They  are 
generally  granted  to  shopkeepers  commencing  business,  and  to  tradesmen 
generally.  The  great  advantage  of  this  system,  which  is  thus  far  substi- 
tuted to  the  discounting  of  notes,  is,  that  the  borrower  never  draws  more 


BANKS  AND  CURRENCY.  95 

from  the  bank  than  what  is  absolutely  necessary  for  the  purposes  of  his 
business.  The  banks  require  that  tlie  capital  loaned  should  be  actively  and 
constantly  employed.  One  of  the  witnesses  says,  "  I  would  say  that  no 
cash  account  is  at  all  well  operated  upon,  unless,  at  the  close  of  it  in  a  year, 
the  amount  of  the  transactions  on  each  side  is,  at  the  very  least,  five  times 
the  amount  of  the  grant.  When  the  account  continues  stagnant  for  any 
length  of  time,  we  intimate  to  the  holder,  that,  at  a  fixed  period,  he  must 
pay  it  up." 

The  total  amount  of  the  notes  in  circulation  is  stated  for  1825 : 

in  notes  of  £5  and  upwards 1,230,000 

in    do.    of  under  j£5,  never  lower  than  £1,  .  2,080,000 


at  £3,310,000 


The  great  and  efficient  method  of  preventing  the  over-issuing  of  bank 
notes,  and  the  depreciation  of  their  value,  consists  in  the  practice,  rigorously 
adhered  to  by  all  the  banks,  of  exchanging  each  other's  notes  twice  a  week, 
and  paying  immediately  the  balances.  For  that  purpose,  "  all  the  banks  of 
Scotland  have  agents  at  Edinburgh,  who  exchange  their  notes  twice  a 
week,  Monday  and  Friday ;  . . . .  and  the  balances  (are)  paid  by  short  dated 
bills  (ten  days)  on  London.  The  state  of  those  balances  is  looked  at  by  the 
banks,  with  the  utmost  jealousy  and  attention ; if  any  thing  in  any  de- 
gree wrong  were  to  appear,  the  banks  would  instantly  correct  it,  and  force 
a  bank  acting  improperly  to  alter  its  mode  of  conduct."  This  method  is 
the  same  which,  though  with  less  rigor  and  uniformity,  is  successfully  used 
by  the  allied  banks  of  Boston,  and  by  the  Bank  of  the  United  States,  for 
preventing  excessive  issues  of  paper. 

It  is  asserted,  that  the  whole  loss  sustained  in  ScotlEind  by  the  public,  by 
bank  failures,  through  more  than  a  century,  has  amounted  to  no  more  than 
£36,344 ;  and  this  result  seems  to  be  altogether  ascribed  to  the  peculiar 
features  briefly  noticed  in  this  note. 


NOTE  C. 

RESTRICTIONS  ON  PRIVATE  BANKING. 

It  is  also  provided  by  a  law  of  the  State  of  New-York,  (1818,)  that  "  no 
person,  association  of  persons,  or  body  corporate,  except  such  bodies  corpo- 
rate as  are  expressly  authorized  by  law,  shall  keep  any  office  for  the  pur- 
pose of  receiving  deposits,  or  discounting  notes  or  bills,  or  issumg  any 
evidence  of  debt  to  be  loaned,  or  put  in  circulation  as  money :  nor  shall 
they  issue  any  bills  or  promissory  notes  or  other  evidences  of  debt  as  private 
bankers,  for  the  purpose  of  loaning  them,  or  putting  them  in  circulation  as 
money,  unless  thereto  specially  authorized  by  law." 

The  prohibition  to  issue  any  species  of  paper,  that  can  be  put  in  circula- 
tion as  money,  is  perfectly  proper,  and  indeed  necessary :  but  that  of  receiv- 
ing deposits,  or  discounting  notes  ox  bills,  must  have  had  some  special  and 
temporary  object  in  view,  and  does  certainly  require  revision.  Why  indi- 
viduals should  not  be  permitted  to  deposit  their  money  with  whom  they 
please,  is  not  understood.  In  such  cases,  interest  is  generally  allowed,  and 
this  practice  promotes  frugality,  and  should  rather  be  encouraged  tlian  for- 
bidden. So  long  as  credit  is  deemed  essential  to  commerce,  tlie  discounting 
of  notes  or  bills,  by  private  individuals,  creates  competition,  and  is  a  public 
benefit.     Incorporated  banks  cannot  conveniently  alter,  cither  the  rate  at 


^^  BANKS  AND  CURRENCY. 

which  they  discount,  or  the  time  at  which  the  notes  discounted  must  be 
paid  or  renewed.  Private  capitalists  may  and  do  modify  their  loans,  in  both 
respects,  according  to  the  state  of  the  money  market,  and  to  the  wants  of 
the  community.  They  will  discount  at  the  rate  of  four  or  five  per  cent.> 
when  the  use  of  capital  is  worth  no  more ;  and,  being  still  controlled  by  the 
general  law  of  the  land,  they  never  can  legally  receive  more  than  the  legal 
rate  of  interest.  And  they  may,  to  the  great  benefit  of  commerce,  discount 
business  notes  due  at  three  and  six  months  date.  The  advantages,  if  not 
the  necessity,  of  this  accommodation  are  such,  that  it  is  understood,  that  the 
law  in  question  is,  in  that  respect,  daily  disregarded.  The  prohibition  al- 
luded to  has  no  other  effect,  than  that  of  deterring  some  prudent  capitalists 
from  engaging  in  that  business,  and  of  enhancing  the  premium,  which, 
those  who,  in  order  to  meet  their  engagements,  negotiate  the  evidences  of 
debt  due  to  them,  must  pay  for  the  discount. 


BANKS  AJTD  CURRENCY. 


97 


STATEMENT  I. 

A  List  of  the  State  Banks  in  operation  on  the  1st  of  January, 

1830. 


Capital. 

MASSACHUSETTS. 

Massachusetts 800.000 

Union 800.000 

Phoenix 200.000 

Gloucester 120.000 

Newburyport 210.000 

Beverly 100.000 

Boston 900.000 

Salem 250.000 

Plvraouth 100.000 

Worcester 200.000 

Marblehead 120.000 

Pacific 200.000 

State 1.800.000 

Mechanics    200.000 

Merchants,  (Salem) 400.000 

]  Taunton 175.000 

New-England 1.000.000 

Hampshire 100.000 

Dedham 100.000 

Manut:  &  Mech's.  (Boston)  .  .  .  750.000 

Springfield 250.000 

Lynn  Mechanics 100.000 

Merrimack 150.000 

Pavvlucket 100.000 

SutTolk 750.000 

Commercial,  (Salem) 300.000 

Bedford  Commercial 250.000 

Agricultural 100.000 

American 750.000 

Andover 100.000 

Asiatic 350.000 

Atlantic 600.000 

Barnstable    100.000 

Blackstone    100.000 

Brighton 150.000 

Bunker  Hill 150.000 

Cambridge    150.000 

Central    50.000 

Citv    1.000.000 

Columbian    500.000 

Commonwealth 500.000 

Danvers 120.000 

Eagle 500.000 

Exchange 300.000 

Fall  River 200.000 

Falmouth 100.000 

Farmers 100.000 

P'ranklin,  (Boston) 100.000 

Franklin,  (Greenfield) 100.000 

(Jlobe 1.000.000 

Hampden  .  • 100.000 

Hampshire  Man 100.000 

Honsaionic KW.OOO 

Leicester    ItW.OOO 

Lowell     100.000 

Man.  &  Mech's.  (Nantucket)    .  100.0<X) 

.\fendon 100.000 

.Mercantile    200.000 

.VlfrchnnUj,  (New.Bcdf()rd)  .  .  .  250.000 

Milll)iiry     100.000 

N'orfolk 200.000 

North  Bank 750.000 


Capital. 

Oxford 100.000 

Sunderland 100.000 

Sutton 75.000 

Washington 500.000 


66  Banks....  20.420.000 


MAINE. 

Portland 200.000 

Saco 100.000 

Cumberland , 200.000 

Bath 100.000 

Lincoln 100.000 

Augu.sta 100.000 

Kennebunk 100.000 

Gardiner 100.000 

Waterville 50.000 

Bangor 50.000 

Cai'co 200.000 

Canal 300.000 

Manufacturers 100.000 

Merchants 150.0.0 


South  Berwick 

Thomaston 

Union 

Vassalborough . 


60.000 
50.000 
50.000 
60.000 


18  Banks 2.000.000 


NEW-HAMPSHIRE. 

Union 150.000 

Concord,  (Lower) 80.000 

Portsmouth  100.000 

Exeter  100.000 

Strafford 100.000 

Cheshire  ,. 100.000 

New-Hampshire lOS.-'JOO 

Rockingham lOO.OCO 

Commercial 100.000 

Piscalaqua 150.000 

Dover 128.070 

Merrimack  Co 100.000 

Farmers 65.000 

Winnepisogee 83.100 

Pemigewasset 50.000 

Grafion 100.000 


Claremont 

Connecticut  River 


60.000 
60.000 


18  Bonks.. 


1.791.670 


VERMONT. 

Burlington 63.000 

Windsor 80.000 

Braftlettorough ."iO.OOO 

Rutland (KUKX) 


Montnelier 
St.  Albans  . 
Caledonia.. 
Vorgennes  . 


.30.000 

20.000 
SO.fHXl 
S0.0(« 


98 


BANKS  AND  CURRENCY. 


STATEMENT  1.— Continued. 


Orange  County  , 
Bennington  — 


Capital. 
29.625 
40.000 


10  Banks. 


432.625 


RHODE  ISLAND. 

Providence  500.000 

Rhode  Island 100.000 

Exchange 500.000 

Bristol 150.000 

Washington 75.000 

Warren  105.350 

Smithfield  Union 60.000 

Newport  120.000 

Roger  Williams 499.950 

Rhode  Island  Union 200.000 

Narragansett 50.000 

Commercial,  (Bristol) 150.000 

Manufacturers 220.000 

Union,  (Providence) 500.000 

Pautuxet 87.858 

Burrill ville  Agr'l.  and  Man'g. . .  37.360 

Cranston 25.000 

Eagle,  (Providence) 300.000 

Eagle,  (Bristol) 50.000 

Franklin 38.000 

Freeman's 67.000 

Kent 20.000 

Landholders 50.000 

Merchants,  (Newport) 50.000 

Merchants,  (Providence) 500.000 

N.  E.  Commercial,  (Newport)  .  75.000 

Phcenix,  (Westerly) 42.000 

R.I.  Central 66.275 

Scituate 15.660 

Warwick 20.000 

Bank  of  N.  America 100.000 

Mechanics 394.600 

Mechanics  and  Man'g.  (Prov.)  .  103.990 

HightSt.  Bank 70.000 

Smithfield  Exchange 60.000 

Village  Bank 40.000 

Smithfield  Lime  Rock 100.100 

Cumberland 65.750 

R.  I.  Agricultural 60.000 

Mount  Vernon 40.000 

N.E.Pacific 83.750 

Union  (Bristol) 40.000 

Hope,  (Warren) 100.000 

North  Kingston 44.485 

Centreville 25.000 

Vi'^oonsocket  Falls 51.269 

Mount  Hope  (Bristol) 75.000 

47 Banks....  6.158.397 


CONNECTICUT. 

New-London 146.437 

Norwich 150.000 

Hartford 1.252.900 

Phoenix 1.218..'300 

Bridgeport 100.000 

Union  (New-London) 100.000 

Windham  Co 104.390 


Capital. 

Thames 153.500 

Fairfield  Co 133.000 

Mechanics  of  N.  Haven 333.850 

Middletown 400.000 

New-Haven 339.600 

Stonington 53.000 

13  Banks....  4.485.177 


NEW-YORK. 

State  Bank  at  Albany 369.000 

Geneva 400.000 

Utica 500.000 

Mech's.  and  Farmers,  Albany  .  312.000 

Catsldll 1 10.000 

Phcenix 500.000 

New- York 1.000.000 

Merchants 1.490.000 

Mechanics 2.000.000 

Farmers,  (Troy) 278.000 

Albany 240.000 

Mohawk 165.000 

Union 1 .000.000 

America 2.031.200 

City  Bank l.OOO.OOO 

Troy 352.000 

Ontario 500X)00 

Chenango 100.000 

Middle  District 406.153 

Auburn 184.000 

Central,  (Cherry  Valley) 86.000 

Jefferson  County 74.000 

Trad  esmens 480.000 

Dry  Dock  Co 200.000 

North  River 500.000 

Commercial 225.000 

Duchess  County 75.000 

Rochester 250.000 

Long  Island 300.000 

Franklin 510.000 

Newburgh 120.000 

Orange  County 106.000 

Lansingburgh 220.000 

Manhattan  Co 2.050.000 

Delaware  and  Hudson 700.000 

Fulton 750.000 

Chemical 500.000 


37 Banks....  20.083.353 


NEW-JERSEY. 

State  Bank  Camden 266.050 

'•      "       New-Brunswick...  71.984 

"      "       Elizabethtown 132.550 

"      "       Newark 280.000 

"      "       Morris 93.700 

Farmers  Bank  New  Jersey  . . .  100.000 

New-Brunswick 90.000 

Newark  Bank'g.  and  Ins.  Co. . .  350.000 

Sussex  27.500 

Trenton  Banking  Co 214.740 

Cumberland 52.025 

Commercial 30.000 

Far's.  and  Mecli'.s.  Rah  way 30.000 


BANKS  AND  CURRENCY. 


99 


STATEMENT  l— Continued. 


Capital. 

Orana:*  Bank 50.000 

People's  do 75.000 

Salem  Banking  Ca 30.000 

Salem  and  P.  Man'g. 30.000 

Washington  Bank 93.460 

18  Banks....  2.017.009 


PENNSYLVANIA. 

Pennsylvania 2.500.000 

Philadelphia 1.800.000 

North  America 1.000.000 

Farmers  and  Mechanics 1.250.000 

Chamber.sburgh 247.228 

Chester  County 90.000 

Delaware  County 77.510 

Getiysburgh 125-318 

Pittsburgh 346.155 

Carlisle 171.466 

Easton 187.380 

Farmers  of  Bucks  Co 60.000 

Farmers  of  Lancaster 400.000 

Farmers  of  Reading 300D00 

Harrisburgh 158..525 

Lancaster 134.235 

Monongahela  Bank  of  )  102.1''3 

Brownsville  ) 

Northampton 1 12.500 

Westmoreland 107.033 

York 168.720 

Germantovvn 129.500 

Montgomery  County 133.340 

Northern  Liberties 200.000 

Coramcrcid 1.000.000 

Mef  hariics  of  Philadelphia  ....  529.3.30 

Schuylkill 500.000 

South  wark 249.630 

Kensington 124.990 

Penn  Township 149.9HO 

Columbia  Bridge 395.000 

Miners  Bank  of  Potts  ville 40.000 

Erie 20.000 

Girard's  .., 1.800.000 


33  Banks.. 


14.609.963 


DELAWARE. 

Delaware  Bank,  Wilmington..  UOJOOO 

Farmers  Bank  of  Del 500.000 

Wiluiington  and  Brandywine. .  120.000 

Hank  ol  Smyrna 100.000 

ComruorrialBank  of  DeL  ...  Not  known. 

Wilmington (to. 

4  Banks 830.000 

2  not  known.  

6  Bank.*). 

MARYLAND. 

Bank  of  Bakimoro 1.197.5.% 

I'nion l.SOO.OfX) 

Me(  hamcs .384.(X)0 

Commercial  and  Farmers  ....  318.400 


Capital 

Farmers  and  Merchants 414.045 

Franklin 406.500 

Marine 235.000 

Hageistown 250.000 

Farmers  of  Mary  land 820.000 

Susquehannah  Bridge 175.000 

Westminster 175.0(10 

Frederick  County 175.000 

Bank  of  Maryland 200.000 

13  Banks....  6.250.495 


DISTRICT  OF  COLUMBIA. 

Washington 479.120 

Union,  (Georgetown) 47a2.30 

Alexandria 500.000 

Potomac 500.000 

Mechanics  of  Alexandria 372.544 

Farmers  of           do 310.000 

Metropolis 500.000 

Farmers  and  Mechanics  )  .qj.  ann 

of  Georgetown  y  " 

Patriotic    250.000 


9  Banks....  3.875.794 


VIRGINIA. 

Bank  of  Virginia 2.740.000 

Farmers  of  Virginia 2.000.0C0 

Bank  of  the  Valley 654.000 

North- Western  Bank  )  , —  ,r,n 
of  Virgmia              ^ 

4  Banks....  5.571.100 


NORTH  CAROLINA. 

Cape  Fear 79.5.000 

Newbern 600.000 

Slate  Bank l.fOO.OOO 


SBanis....   3.195.000 


SOUTH  CAROLINA. 

Bank  of  State  of  S.  Carolina.. .   1.156.000 
Planters  and  Mech.inics,    )  1  (XX)  000 

Charleston  S 

State  Bank 800.000 

South  Carolina 675.000 

Union 1.000.000 


Banks. 


4.631.000 


GEORGIA. 

Bank  of  State  of  CJcorgia 1.30.3.436 

Planters  Bank  of    do .Wi.OOO 

Marine  and  Fire  Insurance Not  en  von 

Augusta roO.tHK) 

Daricn -184.276 

Central 922.317 

Augusta  Insurnnro 1 10 000 


100 


BANKS  AND  CURRENCY. 


STATEMENT  L— Continued. 


Capital. 

Macon $  75.000 

Merchants  and  Planters 142.000 

9  Banks....  4.203,029 

LOUISIANA. 

Louisiana  State  Bank 1.248.720 

Orleans 424.700 

Bank  of  Lou  isiana 2.992.560 

Branch  of  Bank  of  Louisiana  . .   1.000.000 

4 Banks....  5.665.980 


ALABAMA. 

Bank  of  State 

"     of  Mobile 


495.503 
148.000 


2  Banks.... 

MISSISSIPPL 

Bank  of  State  of  Missis-  > 
sippi  and  Branches         )  "' 
1  Bank. 

TENNESSEE. 

Bank  of  State  of  Tennessee 

1  Bank. 


643.503 


950.600 


737.817 


Capital. 
OHIO. 

Chilicothe 500.000 

Steubenville 100.000 

Western  Reserve  Bank 82.386 

Belmont  Bank  of  St.  Clairsville  100.000 

Commercial  of  Scioto 100.000 

Farmers  of  Canton 100.000 

Farmers  and  Mechanics  >  nviArtn 

of  Steubenville              S"  1^"W 

Franklin  of  Columbus 100.000 

Lancaster  Ohio  Bank 100.000 

Mount  Pleasant 100.000 

Marietta 72.000 


11  Banks....   1.454.386 


MICHIGAN. 

Bank  of  Michigan 100.000 

1  Bank.    


FLORIDA. 

Bank  of  Florida 75.000 

1  Bank.    


RECAPITULATION. 


Massachusetts 

Maine 

New-Hampshire  .... 

Vermont 

Rhode  Island 

Connecticut 

New- York 

New-Jersey 

Pennsylvania 

Delaware 

Maryland 

District  of  Columbia  . 

Virginia 

North  Carolina 

South  Carolina 

Georgia 


20.420.000 
2.050.000 
1.791.670 
432.625 
6.118.397 
4.485.177 

20.083.353 
2.017.009 

14.609.963 
830.000 
6.250.495 
3.875.794 
6.571.100 
3.195.000 
4.631.000 
4.203.029 


Louisiana  . 
Alabama.. 
Mississippi 
Tennessee 

Ohio  

Michigan  , 
Florida  . . . 

Delaware , 

Do 


328 
1 


329 
1 


330 


5.665.980 
.  643.503 
;  950.600 
■  737.817 
1.454.386 
10.000 
75.000 


110.101.898 


BANKS  AND  CURRENCY. 


101 


STATEMENT  II. 
Situation  of  State  Banks,  of  which  returns  have  been  obtained. 

1st  of  January,  1811. 

STATE 

No.  of 
Banks 

Capital          Circulation 

Specie 

Massachusetts 

Maine 

15 

6 

13 

1 

4 
6 
4 

1 

50 

6.292.144 
1.250.000 
1.917.000 
269.760 
6.153.050 
4.895.202 
2.341.395 
1.500.000 

2.082.331 
496.077 
542.508 
227.423 

3.221.948 

2.730.000 
927.397 

2.942.717 

1.354.666 
255.998 
394.470 
49.474 
819.322 
850.000 
450.000 

1.499.512 

Rhode  Island 

New- York 

Pennsylvania 

Maryland 

District  of  Columbia  . . 
Virginia  

24.618.551 

13.170.401 

5.673.442 

1 

1815.                                  1 

Massachusetts 

Maine 

20 

8 

10 

14 

4 

37 

17 

7 

2 

1 

120 

10.950.000 

1..380.000 

941.152 

2.027.000 

2.41.3.230 

11.678.238 

7.832.002 

3.266.457 

4.029.097 

754.900 

3.022.112 

1.046.783 

596.323 

549.405 

1.194.439 

6.100.248 

3.970.000 

1.546.540 

4.616.240 

975.000 

6.753.669 
444.816 

475.688 
431.859 
308.199 
1.330.829 
740.000 
259.074 
760.943 

New-Hampshire 

Rhode  Island 

New- York 

Pennsylvania 

Maryland 

District  of  Columbia  . . 
Virginia 

Louisiana  ••• 

45.272.076 

23.617.090 

11.505.077 

1816.                                  1 

Massachusetts 

Maine 

25 

11 

10 

10 

4 

38 

20 

7 

2 

1 

134 

11. .575.000 

1.410.000 

998.121 

2.317.320 

2.273.000 

12.880.397 

8.406.782 

3.311.544 

4.090.762 

724.900 

1.126.743 

901.991 

627.817 

576.526 

1.322.684 

11. 401. .390 

5.615.000 

2.173.453 

6.031.446 

925.000 

1.270.469 
312.079 
259.549 
358.160 
303.167 

4.005.644 
760.000 
283.838 
774.031 
431.246 

New-Hampshire 

Rhode  Island 

New-York 

Pennsylvania 

Maryland 

District  of  Columbia  . . 
Virginia 

Louisiana 

47.987.826 

31.702.050 

8.768.183 

1 

102 


BANKS  AND  CURRENCV. 


STATEMENT  11.— Continued. 


1st  of  January,  1820. 


STATE. 

Massachusetts 

Maine 

New-Hampshire . . . 

Vermont 

Rhode  Island 

Connecticut 

New- York 

New-Jersey 

Pennsylvania 

Delaware 

Maryland 

District  of  Columbia 

Virginia 

North  Carolina  .... 
South  Carolina  .... 

Georgia 

Louisiana 

Alabama 

Tennessee 

Kentucky 

Ohio 

Indiana 

Illinois 

Missouri 

Mississippi 


Capital 


Circulation 


Specie 


10.485.700 

1.654.900 

1.005.276 

44.955 

2.982.026 

467.937 

2.068.790 

214.740 

12.881.780 

974.900 

86.290 

5.525.319 

5.212.192 

2.964.887 

2.475.000 

3.401.510 

924.000 

321.112 

1.545.867 

4.307.431 

1.697.463 

202.867 

140.910 

250.000 

900.000 


2.460.697 

1.380.582 

589.114 

185.342 

738.192 

138.234 

1.058.769 

110.624 

3.282.020 

405.972 

44.435 

838.030 

2.733.746 

3.851.919 

1  063.873 

3.477.071 

459.850 

166.686 

898.129 

815.406 

1.203.869 

276.288 

52.021 

135.258 

275.447 


212  62.735.842  26.641.574  19.444.959  10.672.163 


3.378.565 
278.924 
117.441 
46.121 
503.512 
75.780 
876.633 
152.603 

4.297.034 

211.454 

27.153 

1.444.902 
882.056 
635.761 
825.305 

1.268.982 
339.375 
958.381 
279.869 

1.035.672 
454.452 
216.748 
151.604 
773.652 
212.980 


1.337.172 
521.317 
228.831 

49.090 
406.867 

44.645 
301.009 

21.413 

2.003.295 

115.502 

21.030 
265.234 
993.673 
705.582 
395.791 
813.750 
290.543 
192.708 
343.882 
693.381 
433.612 

86.350 

74.715 
252.563 

79.608 


\st  of  January,  1830. 


Massachusetts 

Maine 

New-Hampshire 

Vermont 

Rhode  Island 

Connecticut 

New- York 

New-Jersey 

Pennsylvania 

Delaware 

Maryland 

District  of  Columbia. 

Virginia 

North  Carolina 

South  Carolina 

Georgia 

Louisiana 

Alabama 

Mississippi 

Tennessee 

Total.... 

Capital   on    which 
loans  are  not  given. 
New- York  4.394.000 
Delaware      830.000 


Capital    on    which 
loans  are  given 


281 


20.420.000 

2.050.000 

1.791.670 

432.625 

6.118.397 

3.692.577 

15.637.353 

844.284 

12.810.333 

830.000 

5.525.495 

3.875.794 

5.571.100 

3.195.000 

1.156.000 

4.203.029 

4.665.980 

495.503 

950.600 

737.817 


95.003.557 


5.224.000 


89.779.55': 


4.747.784 

549.110 

743.457 

680.379 

673.836 

1.503.460 

7.959.280 

374.799 

7.308.368 

376.000 

1.733.659 

946.059 

3.857.964 

1.431.543 

1.175.000 

2.719.356 

1.301.483 

522.637 

540.190 

30.550 


.39.174.914 


2.545.230 
497.072 
173.682 
124.880 
861.031 
452.44-i 
10.354.500 
307.201 

6.841.448 
300.000 

1.864.397 
.564.894 

1.974.171 
452.389 
793.000 

1. 382.634  i 

2.016.560 
136.656 
647.756 
339.174 


987.213 
208.921 
226.428 
428.817 
343.389 
337.788 

1.560.291 
83.667 

2.414.669 
170.000 
777.009 
228.914 
832.732 
179.268 
129.000 

1.305.141 

1.492.674 

127.596 

77.665 

78.461 


32.531.119 


11.999.643 


28.590.894 
2.565.256 
2.466.291 
856.814 
6.909.705 
4.195.690  i 

20.370.693 
1.153.407 

21.474.173 

not  known 
6.627.270 
3.837.272 
7.698.906 
4.621.810 
2.605.504 
6.252.474 
6.796.351 
237.060 
1.927.435 
628.436 


129.815.441 


BANKS  AND  CURRENCV. 


103 


STATEMENT  III. 

Number  and  Capital  of  the  State  Banks,  of  the  situation  of 
tohich  returns  have  not  been  obtained. 


STATES. 

Massachusetts.  . . 

Maine  

New-Hanipsliire  . 
Connecticut.  . . . . 

New-York  

New- Jersey 

Pennsylvania  . .. 

Delaware  

Maryland 

Dist.  of  Columbia 

Virginia  

North  Carolina  .  • 
South  Carolina  . . 

Georgia 

Louisiana 

Alabama 

Mississippi 

Tennessee 

Kentucky 

Ohio 

Indiana 

Illinois   

Missouri 

Michigan  

Florida  


1811 


Fij-st    of    January, 
1815    1816    1820 


1830 


Capital      No.       CapiUl       No.       Capital       No.        Capital 


No.       Capital 


815.250 
1.933.000 
7.253.00(1 

739.740 


1.576.600 

3.475.000 

210.000 

754.000 


100.000 
240.460 
895.000 


1      100.000     1        75.000 
3      450.000 


3.C55.750 
lG.533.0tiH 
2.121.932 

3.3yo.5t;o 

966.9'JO 

811.838 

92.000 

1.576.600 

3.730.900 

623.580 

677.400 

100.000 

212.962 

959.175 

1.434.719 


4.017.575 
10493  756 
2.072.  J 15 
2.504.200 
974.500 

982.469 

421.415 

2.776.600 

3.832.758 

1.502.600 

697.400 

'100.000 

815.281 

2.057.000 

2.061.92 


38  17.992.050   88  36  987.514  112  41.834.596   95  39.474.769    4815.188.711 


3.221.400 
16919.984 
1.916.209 
l.f  00.000 

6,621.841 


2.000.000 

1.673.420 
148.000 

573.915 

4.500.000 

100.000 


792.600 
4.446.000 
1.172.725 
1.800.000 

not  known 

725.000 


3.475.000 


1,000.000 
148.000 


100.000 
75.000 


*  And  Bank  of  Wilmington,  not  included    1 

49 


STATEMENT  IV. 

A  List  of  the  Banks  which  have  failed,  or  discontinued  their 
business,  from  1st  January  1811,  to  1st  July  1830. 


Capital. 
MASSACHUSETTS. 

Essex  300.000 

New-Bedlord 150.000 

Northamplon 75.000 

Farmers,  (Belcherlown) 100.000 

Brighton 150.000 

Sutlon 75.000 


6  Bank.s . 


850.000 


MAINE. 

Maine 300.000 

Peiiobsi  ot . .  150.000 

Wistanjict IOOjOOO 

Hallowel    150.000 

Kenntl>eck 100.000 

I'a8.sama()uud(ly  ,50.000 

Castiiie 100.000 

Lincoln  and  Kennebeck 200.000 


8  Banks. 


1.150.000 


RHODE  ISLAND. 

Fanners  and  Mechanics,  ) 

Pawtuxet  J  ■  ■  ■ 

Ear's.  Exchange,  Gloucester. . 

1  Bank.... 


Capital. 


200.000 


200.000 


NEW-HAMPSHIRE. 

Coos 100.000 

Concord 29.600 


2  Banks.. 


129.600 


CONNECTICUT. 

Eagle 500.000 

Derby 100.000 


2  Banks. 


600.000 


104 


BANKS  AND  CURRENCY. 


STATEMENT  W.— Continued. 


Capital. 
NEW-YORK. 

J.  Barker's  Exchange 495.250 

Utica  Insurance  Co 100.000 

Columbia 167.650 

Hudson 110.000 

Niagara 108.000 

Plattsburgh 300.000 

Washington  and  Warren 400.000 

New-York  Manufacturing  Co.  700.0Q0 

Franklin 510.000 

Middle  District 487.776 

Calskill  Aqueduct  Association 

10  Banks....  3.378.676 


NEW-JERSEY. 

Jersey  City  Bank 200.000 

Patterson 160.000 

State  Bank,  Trenton 92.400 

Protection  and  Lombard 200.000 

Franklin 300.000 

Monmouth 40.000 

Manufacturing 150.000 

Salem  and  Philadelphia 

Hoboken  


7  Banks....   1.142.400 


PENNSYLVANIA. 

Washington 92.070 

Farmers  and  Mechanics   >  ha  4ar. 

ofGreencastle               y-'  ^^'^''^ 

Do.    do.    of  Pittsburgh 65.337 

Juniata 164.478 

Marietta  and  Susquehan-  )  con  Aon 

nah  Trading  Co.            \--  '^■^^•^•^O 

Pennsylvania  Agr'l.  and  )  nmno 

Man'g.  Bank                 \--  ^1"-^"- 

Delaware  Bridge 99.715 

Allegheny 144.807 

Beaver 78.985 

Swatara 75.075 

Centre 159.610 

Huntingdon 123.122 

Northumberland, Union  )  ,,~ „Qn 

and  Columbia                ]•■  "''•y»" 

North- Western  Bank 77.688 

Union  of  Pennsylvania 124.792 

Silver  Lake 64.882 

Fayette,  New-Salem 

Harmony 

Wilkesbarre  Branch 


16  Banks....   1.811.558 


DELAWARE. 

Farmers  and  Mechanics  ) 
of  Delaware  J  ' ' 

1  Bank. 


45.000 


Capital. 
MARYLAND. 

Elkton 110.000 

Conococheague 157.500 

Cumberland 107.862 

Somerset  and  W 90.000 

Somerset 195.850 

Caroline 103.045 

Havre  de  Grace 132.075 

City 838.540 

Planters,  P.  George's  County . .  86.290 

9  Banks....  1.821.162 


DISTRICT  OF  COLUMBIA. 

Columbia 901.200 

Union  of  Alexandria 340.000 

Central 252.995 

Franklin 163.265 


4  Banks . 


1.657.460 


VIRGINIA. 

Ohio  Co 60.000 

Charleston  M.  and  C.  Co 32.580 

Winchester 122.930 

Monongaha 25.000 

Farmers  and  Mechanics,  >  ,g  .gn 

Harper's  Ferry  y'' 

SouthBranch 25.000 

Farmers,  Merchants,  and  )  np,  Aor. 

Mech's.  Jefferson  Co.    S'' 

Warrentown 60.000 

Leesburg  Union 20.000 

Loudon  Co 30.000 


lOBanlis.. , 


421.415 


NORTH  CAROLINA. 

Fayette  ville 

Bertie 

SOUTH  CAROLINA. 

Cheraw 20.000 

Hamburg 

IBank....       20.000 


GEORGIA. 

Darien 480.000 

1  Bank.    


LOUISIANA. 

Planters  Bank 200.000 

Bank  of  Louisiana 724.000 


2  Banks . 


924.000 


BANKS  Ai\D  CURRENCY. 


105 


STATEMENT  IV.—Contmued. 


Capital. 
ALABAMA.  | 

Planters  nnd  Merchants 104.175 

Tombeckbe 156.037 

Steamboat 16.000 


3  Banks . 


337.112 


TENNESSEE. 

Fayetteville  Transfer 1 10.000 

Farmers  and  Mechanics  >  ,gQ  gy^ 
of  Nashville                   ^  "  ' 

Nashvillo  and  Branches 994. 5G0 

Tennessee  Bank,  (old) 371.107 

3  Branches  of  <lo 300.000 

iNashvillo  Branch  of  do 206.775 

RoKcrsvilie  Branch   do 67.140 


4  Banks  and  5  Branches  .  2.229.782 


489.7C0 


46.640 
54.700 


KENTUCKY. 

Farmers  and  Mechanics  \ 

of  Lexington,  {slock  ^  >  . . 

voles  at  par)  ) 

Versailles 111.180 

Kentucky  and  Branches 2.756.220 

Flemingsburg 61.626 

Limestone 135.825 

ShcpherdsviUe 55.880 

Hinksion  Exporting  Co 50.120 

New-Castle 40.520 

Cynthiana 47.900 

Centre  Bank  of  Kentucky.. ..      120.000 

Union  of  Elizabethtown 39.400 

Farmhig  and  Commercial  Bk.        37.219 

Greenville 

Newport 

Southern  Bank  of  Ky 1 17.222 

Farmers  of  Harrodsourg 81.000 

"    "       Somerset 22.379 

Lanca-ster  Exporting  Co 39.900 

Insurance  

Barboursville 

Cumberland  Bank  of  Burkville 

Burlington    

Bank  oi  Columbia 

Frankfort 

(Georgetown 

Greunsburgh 

Green  River 

Christian  Bank 

Bank  of  Henderson 

"     of  Washington 

Commercial  Bank  of  Louisville 

Mount  Sterling 

Morgantown 

Monticcllo   

F'armers  Bank  of  Jessamine 

Owmg.sville   

Petersburg  Steam  Mill 

F'armers  Bank  of  Gallatin 

Far's.  and  Mechanics  of  Logan 

Do.    do.    of  Shelby ville 


Amount  carried  forward     2.307.431        165 


Capital. 
Amount  brought  forward   2.307.431 

Far's.  and  Mech's.  of  Springfield 

Winchester  Com'l 

Commonwealth  Bank 2.000.000 

(nominal.) 

18  Banks....  4.307.431 


OHIO. 
Miami  Exporting  Co.        > 

Cincinnati  S    " 

Columbia,  New  Lisbon" 

Granville  Alex'n.  Soc 

Farmers  Bank  of  New  Salem. 

German  of  Wooster 

Muskingum 

Farmers  and  Mechanics  > 

of  Cincinnati  S  "  ' 

Cincinnati 

Dayton  Manufacturing 

Lebanon  Miami  Bank'g.  Co.. . 

Urbana  Banking  Co 

Farmers  and  Mechanics  > 

Man'g.  Chilicotlie         y" 

Hamilton 

Zanesville  Canal  and 

Manufacturing  Co. 

West  Union 

Lake  Erie 

Steubenville 

Muskingum  of  Zanesville. 

Jefferson  Co 

Bank  of  Xenia 


f 


468.966 

60.000 
12.002 
57.000 
25.000 
97.800 

184.776 

216.430 
61.622 
86.491 
49.685 

99.575 

22.707 

79.125 

100.000 
100.000 
100.000 
100.000 


18  Banks....   1.911.179 


INDIANA. 

Farmers  and  Mechanics  Bk.. 
Bank  of  Vincennes 


130.000 
127.624 


2  Banks... 
ILLINOIS. 


257.624 


Illinois 

Edwardsville 


105.720 
57.190 


2  Banks. 


162.910 


MISSOURI. 

Bank  of  Missouri 250.000 

"    "    St.  Louis 150.000 


2  Banks. 


400.000 


MICHIGAN. 

Monroe  10000 

1  Bank.    


RECAPITULATION. 

129  Banks $24,212,339 

36    do not  known. 


106 


BANKS  AND  CURRENCV. 


STATEMENT  V. 


Depreciation,  per  cent.,  of  Bank  Notes,  during  the  suspension 
of  specie  payments. 


1814.  Seplember  . 
October .... 
November  . 
December  . 

1815.  January  . . . 
February  .. 

March 

April 

May 

June 

July 

August 

September. 
October  . . . 
November. 


1    Balti. 

Philadel- 

New-       1 

1    Djore. 

pliia. 

Yurk.      1 

20 

10      j 

15 

10 

10 

11 

14 

11 

20 

15 

5 

2 

5 

6 

10 

^ 

14 

5 

5 

16 

9 

iH 

20 

11 

14 

19 

11 

m 

20 

15 

13 

21^ 

16 

15 

16 

12J 

I  Pbiladel- 
1     phia. 


1815.  December 

1816.  January  .. 
February  . 
March. ... 

April 

May 

June 

July 

August .. . 
September 
October . . . 
November 
December 

1817.  January  . . 
February  . 


18 

14 

15 

14 

13 

14 

18 
23 
20 

12A 
Hi 
14 

20 

17 

15 

15 

12 

10 

10 

7. 

8 

9, 

9 

7 

9 

7 

3 

2J 

f 

STATEMENT  VI. 

Average  amount,  for  the  years  1819 — 1829,  of  the  principal 

items  of  the  Situation  of  the  Bank  of  the  United  States. 


1819 
1820 
1821 
1822 
1823 
1824 
1825 
1826 
1827 
1828 
1829 


211.074 
808.267 
099.050 
574.893 
584.919 
478.255 
327.219 
592.103 
948.592 
820.944 
703.280 


336.760 
1.526.600 
1.598.473 
2.394.688 
2.588.245 
2.563.672 
3.270.099 
3.592.145 
4..'i68.297 
6.018.784 
8.417.021 


7.236.153 
8.258.701 
11.859.296 
13.116.004 
10.911.700 
13.373.095 
19.807.665 
17.885.210 
17.724.192 
17.127.077 
13,925.701 


39.784.587 
38.593.568 
40.556.619 
44.085  785 
44.084.864 
45.4J5  022 
52.405.583 
51.069.4.58 
50.244.081 
53.966.805 
55  046.002 


Real  Estate.      Specie. 


245.846 

579.152 
736.370 
..393.193 

.566.728 
.745.566 
.118.560 
,298.352 
.474.750 


2.743.834 
5.214.773 
G.469.224 
3.711.143 
4.899.686 
5.909.351 
4.686.557 
5.174.643 
6.327.758 
6.205.107 
6.411.998 


Deposits.       ^f"^ 


5.734.682 
6.581.628 
6.990.073 
6.365.570 
10.401.786 
12.918.108 
12.885.829 
12.578.523 
13.727  274 
14.454.169 
15.172.164 


5.056 

4  410. 

5  009. 

4  671 
5.935 
8.836. 
10.235 
10.808, 
12.414. 
15.011, 


♦  The  actual  amount  of  ciiculation  is  generally  four-fifths  of  the  gross  amount, 
rest  being  notes  in  transitu,  or  accumulated  in  offices  where  they  are  not  payable. 


STATEMENT  VII. 
Actual  circulation  of  the  Bank  of  the  United  States  in  Septem- 
ber, 1830,  showing  where  the  Notes  were  payable. 


Where  payable. 


Notes  in 
circulation. 

Bank  United  States 1.367.180 

Portland   79.280 

Portsmouth 101.985 

Boston  271.180 

Providence 113.920 

Hartford    171.532 

New- York   834.733 

Baltimore   528.638 

Washington  647.602 

Richmond 469.440 

Norfolk 532.400 

Fayetteville  713.760 

Charleston   835.840 

Savannah  622.605 


Amount  carried  forward     7.190.095 


Where  payable. 


Notes  in 
circulation. 


Amount  brought  forward  7.190.095 

Mobile 940.825 

New-Orleans   2.623.320 

'St.Louis 228.700 

Nashville   1.235.275 

Louisville 662.375 

Lexington  ...4».. 908.625 

Cincinnati 647.240 

Pittsburgh 5.'>4.102 

Buffaloe 258.130 

Burlington   96.595 

Agencies  Cincinnati    >  «  okk 

and  Chilicothe         ' '^'"^ 


I 


15.347.657 


Philadelphia,  February,  1831. 

Just  Published,  by  Carey  <Jj'  Lea, 

And  sold  in  Philadelpliia  by  J?.  L.  Carey  S(  A.  Hart ;  in  New- York  by  G.  «^ 
C.  iV  H.  Carvill;  in  Boston  by  Carter  Sf  Hendee — in  Charleston  by  W.H.  Berrett 
—in  New-Orleans  by  W.  M'Kean ;  by  the  principal  booksellers  throughout  the 
Union, 

AND  IN  LONDON,  BY  JOHN  MILLER,  ST.  JAMES'S  STREET. 

VOL.  V. 

(To  he  continued  at  intervals  of  three  months,) 

OF  THE 

ENCYCLOPEDIA    AMERICANA : 

A 

POPULAR    DICTIONARY 

OF 

ARTS,  SCIENCES,  LITERATURE,  HISTORY,  AND  POLITICS, 

BROUGHT  DOW.N  TO  THE  PRESENT  TIME,  AND  INCLUDING  A  COPIOUS  COLLECTION 
OF  ORIGINAL   ARTICLES    IN 

AMERICAN  BIOGRAPHY: 

On  the  basis  of  the  Seve7ith  Edition  of  the  German 

CONVERSATIONS-LEXICON. 


Edited  by  Dk.  FRANCIS  LIEBER, 
Assisted  bv  EDWARD  VVJGGLESVVORTH,  Esq. 


To  he  completed  in  twelve  large  volumes,  octavo,  price  to  subscribers,  bound  in  cloth,  two 
dollars  and  a  half  each. 

E.lCn    VOLUME    WILL   CONTAIN    BETWEEN    GOO    AND    700    PAGES. 


The  Conversation  Lexicon,  of  which  the  seventh  edition  in  twelve  volumes 
lias  lately  been  published  in  Germany,  originated  about  fifteen  years  since.  It 
was  intended  to  supply  a  want  occasioned  by  tlie  character  of  tlie  age,  in  which 
the  sciences,  arts,  trades,  and  the  various  forms  of  knowledge  and  of  active  life, 
had  become  so  much  extended  and  diversified,  that  no  individual  engaged  in  busi- 
ness could  become  well  acquainted  with  all  subjects  of  general  interest ;  while 
the  wide  difi'usion  of  information  rendered  such  knowledge  essential  to  the  ciiar- 
acter  of  an  accomplished  man.  This  want,  no  existing  works  were  adequate  to 
supply.  Books  treating  of  particular  branches,  such  as  gazetteers,  &c.  were  too 
confined  in  character ;  while  voluminous  Encyclopoedias  were  too  learned,  scien- 
tific, and  cumbrous,  beinsr  usually  elaborate  treatises,  requiring  much  study  or 
previous  acquaintance  with  the  subject  di.scussed.  The  conductors  of  the  Con- 
'  versations-Lexicon  endeavored  to  select  from  every  branch  of  knowledge  what 
was  necessary  to  a  well-informed  mind,  and  to  give  jwjiular  views  of  the  more 
abstruse  branches  of  learning  and  science ;  that  their  readers  might  not  be  in- 
commoded, and  deprived  of  pleasure  or  improvement,  by  ignorance  of  facts  or 
expressions  used  in  books  or  conversation.  Such  a  work  must  obviously  be  of 
great  utility  to  every  class  of  readers.  It  has  been  found  so  much  so  in  Germany, 
ihat  it  is  met  with  everywhere,  among  the  learned,  the  lawyers,  the  military,  arf- 
ists,  merchants,  mechanics,  and  men  of  all  stations.  The  reader  may  judge  how 
well  it  is  adapted  to  its  object,  from  the  circumstance,  that  tlwugh  it  now  consists 
of  twelve  volumes,  seven  editions,  comprising  about  one  hundred  thousand  copies, 
iiave  been  printed  in  less  than  fifteen  years.  It  lias  been  translated  info  the 
Swedish,  Danish  and  Dutch  languages,  and  n  French  Iranslation  is  now  preparing 
in  Paris. 


108  ENCYCLOPiEDIA  AMERICANA. 

A  great  advantage  of  this  work  is  its  liberal  and  impartial  character ;  and  there 
can  be  no  doubt  that  a  bt)ok  like  the  Encyclopedia  Americana  will  be  found 
peculiarly  useful  in  this  country,  where  the  wide  diffusion  of  the  blessings  of 
education,  and  the  constant  intercourse  of  all  classes,  create  a  great  demand  for 
general  information. 

In  the  preparation  of  the  work  thus  far,  the  Editors  have  been  aided  by  many 
gentlemen  of  distinguished  ability ;  and  for  the  continuation,  no  efforts  shall  be 
spared  to  secure  the  aid  of  all  who  can,  in  any  way,  contribute  to  render  it  worthy 
of  patronage. 

The  American  Biography,  which  is  very  extensive,  will  be  furnished' by  Mr. 
Walsh,  who  has  long  paid  particular  attention  to  that  branch  of  our  literature, 
and  from  materials  in  the  collection  of  whicli  he  has  been  engaged  for  some  years. 
For  obvious  reasons,  the  notices  of  distinguished  Americans  will  be  confined  to 
deceased  individuals:  the  European  biography  contains  notices  of  all  distin- 
guished living  characters,  as  well  as  those  of  past  times. 

The  articles  on  Zoology  have  been  written  expressly  for  the  present  edition  by 
Dr.  John  D.  Godman;  those  on  Chemistry  and  Mineralogy,  by  a  gentleman 
deeply  versed  in  those  departments  of  science. 

In  relation  to  the  Fine  Arts,  the  work  will  be  exceedingly  rich.  Great  atten- 
tion was  given  to  this  in  the  German  work,  and  the  Editors  have  been  anxious  to 
render  it,  by  tlie  necessary  additions,  as  perfect  as  possible. 

To  gentlemen  of  the  I5ar,  the  work  will  be  peculiarly  valuable,  as  in  cases 
where  legal  subjects  are  treated,  an  account  is  given  of  the  provisions  of  Ameri- 
can, Englisli,  French,  Prussian,  Austrian,  and  CivU  Law. 

The  Publishers  believe  it  will  be  admitted,  that  this  work  is  one  of  the  cheapest 
ever  publislied  in  this  country.  They  have  been  desirous  to  render  it  worthy  of 
a  place  in  the  best  libraries,  while  at  the  same  time  they  have  fixed  the  price  so 
low  as  to  put  it  within  the  reach  of  all  who  read. 


Tliosc  who  can,  by  any  honest  modes  of  economy,  reserve  the  sum  of  two  dollars  anil  fifty 
cents  quarterly,  from  their  family  expenses,  may  pay  for  this  work  as  fast  as  it  is  published  ; 
and  we  confniently  believe  that  they  will  find  at  the  end  that  they  never  purchased  so  much 
general,  practical,  useful  Information  at  so  cheap  a  rate. — Journal  of  Education. 

If  the  encouragement  to  the  publishers  should  corres|ioiid  with  the  testimony  in  favor  of 
their  enterprise,  and  the  beautiful  and  faithful  style  of  its  execution,  the  hazard  of  the  under- 
taking, bold  as  it  was,  will  be  well  compensated  ;  and  our  libraries  will  be  enriched  by  the 
most  generally  useful  encyclopedic  dictionary  that  has  been  offered  to  the  readers  of  the  Eng- 
lish language.  Full  enough  for  the  general  scholar,  and  plain  enough  for  every  capacity,  it  is 
far  more  convenient,  in  every  view  and  form,  than  its  more  expensive  and  ponderous  prede- 
cessors.— American  Farmer. 

The  high  reputation  of  the  contributors  to  this  work,  will  not  fail  to  insure  it  a  favorable 
reception,  and  its  own  merits  will  do  tlie  rest. — Silliman's  Journ.' 

The  work  will  be  a  valuable  possession  to  every  family  or  individual  that  can  afford  to 
purchase  it;  and  we  take  pleasure,  therefore,  in  extending  the  knowledge  of  its  merits. — 
J\ra>ional  Intelligencer. 

The  Eiicyclop;Edia  Americana  is  a  prodigious  improvement  upon  all  that  has  gone  before 
it ;  a  thing  for  our  country,  as  well  as  the  country  that  gave  it  birth,  to  be  proud  of;  an  inex- 
haustible treasury  of  useful,  pleasant  and  familiar  learning  on  every  possible  subject,  so  ar- 
ranged as  to  bo  speedily  and  safely  referred  to  on  emergency,  as  well  as  on  deliberate  inquiry; 
and  better  still,  adapted  to  the  understanding,  and  put  within  the  reach  of  the  nmltitude. 
*  *  *  The  Encyclopaedia  Americana  is  a  work  without  which  no  library  worthy  of  the 
name  can  hereafter  be  made  up. — Yankee. 

The  copious  information  which,  if  a  just  idea  of  the  whole  may  be  formed  from  the  first 
volume,  this  work  afibrds  on  American  subjects,  fully  just.'fies  its  title  of  an  American  Die 
tiouary;  while  at  the  same  time  the  extent,  variety  and  felicitous  disposition  of  its  topics,', 
make  it  the  most  convenient  and  satisfactory  Encyclopajdia  that  we  have  ever  seen.-—' 
jYalional  Journal. 

If  the  succeeding  volumes  shall  equal  in  merit  the  one  before  us,  we  may  confidently  antici- 
pate for  the  work  a  reputation  and  usefulness  which  ought  to  secure  for  it  the  most  flattering 
encouragement  and  patronage.— i^'crfera/  Gazette. 

The  variety  of  topics  is  of  course  vast,  and  they  are  treated  in  a  manner  which  is  at  once 
to  full  of  information  and  so  interesting,  that  the  work,  instead  of  being  merely  referred  to, 
might  be  regularly  perused  with  as  much  pleasure  as  \mtt\l.-j-BaUimore  American. 

We  view  it  as  a  publication  worthy  of  the  age  and  of^tlie  country,  and  cannot  but  believe 
the  discrimination  of  our  countrymen  will  sustain  the  publishers,  and  well  reward  them  fot 
tliis  contribution  to  American  Literature. — Baltimore  Patriot. 

We  cannot  doubt  that  the  succeeding  volumes  will  equal  the  first,  and  we  hence  warmly 
recommend  the  work  to  the  patronage  of  the  public,  as  being  by  far  the  best  work  of  the  kind 
ever  offered  for  sale  in  this  country. —  U.  S.  Gazette. 


■.<■■.'-■  /(',' .  \'  ■'"■■:.  •Lry  (■'■:■:-.•  ■;< *'£■■.  \  ■%u  ««£! 


^    '■■<■■■     '-^^g^'^j^' 
;       ■■■■     '  =.  v--,b;vV!'r.'A' 


UNIVERSITV  OF  ILL1N0IS-UBBA"» 


^0112  062406910 


